General
AZKA Protocol's Risk framework considers 4 core components:
Market Risk : Liquidity risk and insolvency due to bad debt or other market forces. The task of managing this risk is designated to the 'azRisk' team who are responsible for monitoring market dynamics, running quantitative off-chain analysis and making changes to smart contract parameters when necessary.
Smart Contract Risk : risk from vulnerabilities in AZKA smart contracts and architecture. The task of managing this risk is designated to the 'azDev' team.
Counter-party Risk: vulnerabilities from third party dependencies such as oracles, tokens and smart contracts. The task of managing this risk is designated to the 'azDev' team and the 'azRisk' team.
Shariah Risk: ensuring the compliance of the protocol and monitoring any changes in Currency/Collateral/Murabaha tokens that could provoke a revision in compliance. The task of this risk is designated to the 'azShariah' team. Within the AZKA DAO structure the 'azShariah' team will have vito power over the inclusion/exclusion of new and existing tokens as well as any protocol upgrades.
AZKA's main purpose is to provide the ability for financing outside of a conventional based interest structure. This does not mean that we intend to support excessive speculation and risk taking. For that reason, AZKA's parameter selection may come across conservative compared to other DeFi protocols. DTC ratios may be lower than most protocols and the number of supported assets will also be limited.
AZKA's collateral engine is by default not isolated. Every collateral added by a user will secure any all debts for that user. This reduces risks through diversification but only when considering assets with the best risk profiles. Only crypto assets with the best risk profiles will be included as collateral types or currency types.
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