Risk Management
Alula is designed for environments where retail and institutional liquidity coexist. Risk controls must protect pool solvency, surface user risk early, and keep the protocol operational during volatility. Alula combines pool-level safeguards, position-level safeguards, and environment-level circuit breakers.
Health Factor
Every obligation has a health factor (HF) that measures the ratio of weighted collateral value to weighted debt value. When HF drops below configured thresholds, the position becomes eligible for liquidation. The protocol surfaces HF to users with color-coded warnings so they can act before liquidation begins.
Liquidations
Liquidations protect the protocol from undercollateralized debt. When an obligation's liquidation health factor (LHF) falls below 1, any third party can repay a portion of the debt and receive discounted collateral. Liquidations execute in slices (bounded by a close factor per call) rather than all at once, reducing price impact and giving borrowers time to recover.
Interest Rates
Borrow APR increases as pool utilization rises, encouraging repayments and new supply. Each pool uses a kinked interest rate curve with configurable slope segments, combined with a reactive interest rate modifier that dynamically adjusts rates toward a target utilization, smoothing volatility across interest accrual periods.
Withdrawal Throttles
When a pool exceeds its configured utilization limit, stricter withdrawal rules apply. A per-position cooldown prevents rapid sequential withdrawals, and a scarcity limit caps the amount that can be withdrawn in a single operation. These throttles protect against liquidity drains during stress while keeping exits available.
Insurance Fund
Each market can route a portion of fee revenue into an insurance fund contract. When a position remains insolvent after liquidation, the insurance fund absorbs the residual loss through a two-phase process (issue_cover_bad_debt → claim_cover_bad_debt_results), preventing sudden socialized writedowns for lenders. The insurance fund can also freeze market operations in emergencies.
Oracle
Markets rely on a SEP-40-compliant price oracle, configured at deployment and immutable thereafter. Alula provides an optional aggregated oracle that computes the median price across multiple sources and supports circuit breakers that pause price-dependent actions (borrows, collateral withdrawals, liquidations) on stale or anomalous prices.
→ Oracle
Cross-Pool Evaluation
Cross-pool logic evaluates user obligations holistically: collateral posted in one pool can support borrowing in another, according to configured LTV ratios and liability factors. Health, liquidation, and high-utilization rules all operate at the obligation level rather than the individual pool level, enabling capital-efficient, multi-asset positions while enforcing conservative behavior under stress.
Configurable Parameters
Every market and pool parameter — health thresholds, fee schedules, interest rate curves, utilization targets, and market-wide constraints — is configurable and validated. Parameter updates follow a time-locked governance flow to give users visibility into upcoming changes before they take effect.