# Protocol Risks & Mitigations

While **BetterBank** is built on tested frameworks and experienced design, every **DeFi** protocol carries inherent risks. The following sections outline known risks to the protocol and the safeguards in place to mitigate them. This is a non-exhaustive list, but it reflects an honest effort at transparency and risk disclosure.

***

### 🧩 Contract Risks

Smart contracts are immutable and trustless, but that also means **any flaw or vulnerability in the code** can be exploited. BetterBank relies on code deployed to the blockchain — not on traditional legal contracts — making smart contract safety critical.

| Mitigation                | Summary                                                                                                                                                                                                           |
| ------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Tried and true code**   | BetterBank is built on **Aave V3**, a codebase that has secured **billions in TVL** and been tested under real-world conditions for years.                                                                        |
| **Experienced Developer** | Our lead developer and cofounder has extensive experience in DeFi, with successful deployments of Aave forks and multiple seigniorage protocols. He's a known name for **contract auditing and troubleshooting**. |

***

### 🧊 Risk of Temporarily Frozen Assets

There may be instances where **all available tokens of a specific type have been borrowed**, temporarily preventing withdrawals. While this is rare, it's possible in high-utilization events.

| Mitigation                            | Summary                                                                                                                                                  |
| ------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Extreme Interest Rates**            | Interest rates automatically **spike past 80% utilization**, incentivizing quick **repayment** or **new deposits**, freeing up assets for withdrawal.    |
| **Maximum Borrowing Potential (MBP)** | Borrowing is **disabled beyond 80% utilization**, capping demand and protecting liquidity. Withdrawals remain available until 100%.                      |
| **Treasury is a Depositor**           | The **treasury holds funds in the Stronghold** and commits not to withdraw once utilization is near MBP, adding a backstop layer of available liquidity. |

***

### 💸 Risk of Bad Debt

In rare cases — such as a **liquidation cascade during network congestion** — seized collateral may not fully repay borrowed assets. This can occur if **LP-based collateral is shallow** or slippage is too high.

| Mitigation                         | Summary                                                                                                                                                           |
| ---------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Favor LP Cushion**               | A **dedicated LP buffer** is maintained to **absorb slippage** during liquidation events, helping reduce price impact and increase repayment efficiency.          |
| **Borrow Limits**                  | Borrowing is **capped per asset**, especially in early stages, to limit exposure to any one asset. These limits are updated manually and will later be automated. |
| **Isolation Mode**                 | Tokens with **shallow liquidity** are marked **isolated** and may only be borrowed against their **matching Favor LP**, preventing unsafe cross-lending.          |
| **Protocol-Owned Liquidity (POL)** | BetterBank will **build LPs using treasury assets** to deepen liquidity, especially for isolated tokens. Once healthy, these tokens may have isolation lifted.    |

***

### 🔬Risk of Design Mistakes or Innovation in Attack Forms

BetterBank introduces **novel mechanics** that haven’t been widely tested in the wild. While the system is **carefully designed** and reviewed by **experienced developers**, innovation in DeFi always carries the potential for **unexpected attack vectors**. We stay **vigilant**, conduct **ongoing reviews**, and work with **trusted white hats** to stay ahead of emerging threats.

| Mitigation                      | Summary                                                                                                                                                                                                                |
| ------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **A team in the know**          | BetterBank is built by developers who are **deeply involved in DeFi**. They **actively test and challenge** their own assumptions to uncover potential vulnerabilities.                                                |
| **Bug bounties and white hats** | A **bug bounty program** will be initiated as soon as the treasury allows. BetterBank maintains an **extensive white-hat network**, with trusted experts occasionally reviewing or attacking the system in good faith. |

***

### ☢️Extreme Outcomes

In rare scenarios where **liquidity dries up completely**, there is a theoretical risk of a **system-wide failure** through complete and utter disinterest by people to ever invest again, regardless of **the benefits** and **the incentives**.  This is **beyond just a** **bank run in Tradfi**, because BetterBank can take a few of those. While multiple **safeguards** are in place to prevent this, users should understand that **DeFi protocols are not insured** like traditional banks. BetterBank’s design significantly **reduces this risk**, but it remains a **tail-end possibility** to be aware of.\
\
**In all fairness** though, if we think of such extreme outcomes, **the opposite is also possible.** BetterBank may theoretically become **so popular** that there is a **global takeover**, where BetterBank becomes the **new standard of finance.** 

***

### 🧾Final Disclaimer

BetterBank is designed with care, security, and sound tokenomics at its core. However, **DeFi is inherently risky**, and no set of smart contracts can guarantee safety in all scenarios. We believe in **radical transparency**, and we offer this page not as a scare tactic, but as part of our commitment to **informed participation**. 

BetterBank acknowledges and addresses DeFi-specific risks by combining **battle-tested architecture**, **intelligent tokenomics**, and **proactive risk management and engineering**. Users are encouraged to:

* Use **separate wallets** for Stronghold and Wildlands positions.
* Spread out **larger investments** over even **more wallets.**
* **Stay informed** via this documentation and the **official channels**.
* Understand that even with these safeguards, **DeFi carries inherent risk** and should be used responsibly.

Please use BetterBank responsibly.