Risk Mitigation
Dolomite has an expressive system for managing the protocol's risks.
Dolomite leverages Chainlink price oracles wherever possible in its collateral calculations for ordinary assets. Dolomite's usage and collaboration with Chainlink through the BUILD program is documented in the following press release about joining the program.
Some unique assets, like
GLP, require some extra calculations and precaution when marking the value of it as collateral. After accounting for any additional business logic required for a unique asset, common collateral calculations then done through Chainlink, as usual.Market ID | Symbol | Oracle Address |
|---|---|---|
0 | WETH | |
1 | DAI | |
2 | USDC.e | |
3 | LINK | |
4 | WBTC | |
5 | USDT | |
6 | GLP | |
7 | ARB | |
8 | magicGLP | |
9 | plvGLP | |
10 | jUSDC | |
11 | PT-GLP | |
12 | UNI | |
13 | MIM | |
14 | wstETH | |
15 | rETH | |
16 | YT-GLP | |
17 | USDC |
You can check this table is correct and up-to-date by visiting DolomiteMargin on Arbiscan, clicking
Read Contract, selecting the getMarketPriceOracle function and plugging in the corresponding marketId into the input field.Dolomite is able to institute supply caps for individual assets, which limits the protocol's exposure to debt taken against those assets as well as limits the ability to borrow those same assets. If a supply cap is instituted and the protocol is beyond the limitation, the protocol will be in a wind-down-only mode for that asset. Meaning, all transactions executed against
Dolomite Margin for that asset needs to size down the market or, at the minimum, leave it unchanged.Market ID | Symbol | Supply Cap |
|---|---|---|
0 | WETH | No limit |
1 | DAI | 2,000,000 DAI |
2 | USDC.e | No limit |
3 | LINK | 500,000 LINK |
4 | WBTC | 100 WBTC |
5 | USDT | 25,000,000 USDT |
6 | GLP | No limit |
7 | ARB | 5,000,000 ARB |
8 | magicGLP | 5,000,000 magicGLP |
9 | plvGLP | 5,000,000 plvGLP |
10 | jUSDC | 1,00,000 jUSDC |
11 | PT-GLP | 1,000,000 PT-GLP |
12 | UNI | 400,000 UNI |
13 | MIM | 1,000,000 MIM |
14 | wstETH | 3,000 wstETH |
15 | rETH | 1,000 rETH |
16 | YT-GLP | 500,000 YT-GLP |
17 | USDC | No limit |
You can check this table is correct and up-to-date by visiting DolomiteMargin on Arbiscan, clicking
Read Contract, selecting the getMarketMaxWei function and plugging in the corresponding marketId into the input field.Typical to any money market protocol, Dolomite mandates a global minimum collateralization that all positions must have to be considered healthy. Any position that slips below this threshold is subject to liquidation (more on this below).
Some assets have additional collateralization requirements beyond the global minimum. The table below denotes the collateralization requirements for each asset on each network
Dolomite Margin is deployed.Minimum collateralization: 115% (86.9565% LTV)
Market ID | Symbol | Minimum Collateralization (% LTV) |
|---|---|---|
0 | WETH | 115% (or 86.9565% LTV) |
1 | DAI | 115% (or 86.9565% LTV) |
2 | USDC.e | 115% (or 86.9565% LTV) |
3 | LINK | 125% (or 80% LTV) |
4 | WBTC | 125% (or 80% LTV) |
5 | USDT | 115% (or 86.9565% LTV) |
6 | GLP | 120% (or 83.3333% LTV) |
7 | ARB | 120% (or 83.3333% LTV) |
8 | magicGLP | 120% (or 83.3333% LTV) |
9 | plvGLP | 120% (or 83.3333% LTV) |
10 | jUSDC | 115% (or 86.9565% LTV) |
11 | PT-GLP | 120% (or 83.3333% LTV) |
12 | UNI | 133% (or 75% LTV) |
13 | MIM | 115% (or 86.9565% LTV) |
14 | wstETH | 115% (or 86.9565% LTV) |
15 | rETH | 115% (or 86.9565% LTV) |
16 | YT-GLP | 150% (or 66.6667% LTV) |
17 | USDC | 115% (or 86.9565% LTV) |
You can check this table is correct and up-to-date by visiting DolomiteMargin on Arbiscan, clicking
Read Contract, selecting the getMarginRatio function, adding 1e18 then dividing by 1e18. Doing so gives you the global minimum collateralization (115%). Then, select the
getMarketMarginPremium function and plug in the corresponding marketId into the input field. With the margin premium, add 1e18, divide by 1e18, then multiply the result by 115% (the global minimum collateralization).For example, the
Margin Premium for GLP is 43478260869565217. By adding 1e18 and dividing by 1e18 the result is 1.043478260869565217. When you multiply 115% by 1.043478260869565217, you get about 120%.Dolomite can put assets into collateral-only mode, to prevent any user from borrowing them. If a market moves from collateral-only mode being
disabled to enabled, then the market will be in a wind-down mode with respect to any out standing borrows. Users that have any debt will not be able to increase the size of our loans and the protocol could enforce liquidations for those users to forcefully pay their debt back. Putting an asset into collateral-only mode could be due to a variety of reasons, like:- The asset's price oracle is manipulatable to the upside (which increases the surface area for economic attack vectors)
- The asset's price oracle offers a quote that is lower-than-normal, like the price oracle for
GLP - Economically speaking, Dolomite or an integrating protocol doesn't want to encourage the borrowing of certain assets
The table below denotes the borrowing status of each asset on each network
Dolomite Margin is deployed.Market ID | Symbol | Collateral-Only Mode Enabled |
|---|---|---|
0 | WETH | FALSE |
1 | DAI | FALSE |
2 | USDC.e | FALSE |
3 | LINK | FALSE |
4 | WBTC | FALSE |
5 | USDT | FALSE |
6 | GLP | TRUE |
7 | ARB | FALSE |
8 | magicGLP | TRUE |
9 | plvGLP | TRUE |
10 | jUSDC | TRUE |
11 | PT-GLP | TRUE |
12 | UNI | FALSE |
13 | MIM | FALSE |
14 | wstETH | FALSE |
15 | rETH | FALSE |
16 | YT-GLP | TRUE |
17 | USDC | FALSE |
You can check this table is correct and up-to-date by visiting DolomiteMargin on Arbiscan, clicking
Read Contract, selecting the getMarketIsClosing function and plugging in the corresponding marketId into the input field.Isolation Mode is an extremely expressive mechanism for limiting or expanding the functionality of certain assets in
Dolomite Margin. Using Isolation Mode allows Dolomite to dictate which assets can be borrowed against a specific collateral asset, which collateral assets can be used in a position with the Isolation Mode asset, and allow native interactions with the underlying tokens for things like on-chain voting, capturing rewards, or other actions that are specific to the asset.Once an asset is deployed with
Isolation Mode enabled, it can never be disabled. However the settings for Isolation Mode can be tweaked over time if the implementation (per asset) allows for it, liquidity constraints change, or other factors that are outside of Dolomite's control.Isolation Mode assets are deployed as wrapped contracts around the listed asset. So the contract address you see on block explorers may appear different. Typically, these assets will be listed with a lowercase d in the symbol and the name will be prefixed with Dolomite Isolation:. Meaning, for plvGLP, the technical name on-chain is Dolomite Isolation: Plutus Vault GLP and the symbol is dplvGLP.When you make your first deposit of an
Isolation Mode asset into Dolomite, the token approval will be set on your vault address. The vault smart contract isn't created until the deposit occurs, so it may look like an externally-owned account (EOA), but it's not. Dolomite uses Create2 for the creation of the vaults, so your vault address is known before the deposit is executed and the vault is created.Notably, if you open a borrow position with an
Isolation Mode asset, it can never contain another asset in the position that is in Isolation Mode. The differences amongst different Isolation Mode levels can be seen in the table below.Level | Description |
|---|---|
1 | Can contain any debt or collateral asset in the same position, as long as those assets are not in isolation mode |
2 | Can contain only specific collateral assets or specific debt assets in the same position. Cannot contain assets in the same position that are in isolation mode. |
3 | Cannot contain any other collateral asset in the same position. Can only contain specific debt assets in the same position. Cannot contain assets in the same position that are in isolation mode |
The table below denotes the isolation mode status of each asset on each network
Dolomite Margin is deployed.Market ID | Symbol | Isolation Mode Level |
|---|---|---|
0 | WETH | DISABLED |
1 | DAI | DISABLED |
2 | USDC.e | DISABLED |
3 | LINK | DISABLED |
4 | WBTC | DISABLED |
5 | USDT | DISABLED |
6 | GLP | 1 |
7 | ARB | DISABLED |
8 | magicGLP | DISABLED |
9 | plvGLP | 1 |
10 | jUSDC | 3 (can only have USDC as debt; no other collateral assets are allowed) |
11 | PT-GLP | 1 |
12 | UNI | DISABLED |
13 | MIM | DISABLED |
14 | wstETH | DISABLED |
15 | rETH | DISABLED |
16 | YT-GLP | 2 (can only have WETH, DAI, USDC, USDT, WBTC, and MIM debt) |
17 | USDC | DISABLED |
You can check this table is correct and up-to-date by visiting DolomiteMargin on Arbiscan, clicking
Read Contract, selecting the getMarketTokenAddress function and plugging in the corresponding marketId into the input field. Click on the resulting address and on the page whose address you are directed to, check that the contract name contains WrappedTokenUserVaultFactory.Dolomite can enforce an expiration timestamp for any positions that are opened with an Isolation Mode asset with this setting toggled. This feature is essential to preserve the health and solvency of markets that have a maturity. For example, Pendle's YT assets decay toward a value of 0 as they approach maturity. Thus, having an expiration ensures all positions with Pendle's YT tokens can be closed before they are liquidated due to their price declining toward 0.
Market ID | Symbol | Forcefully Expired? |
|---|---|---|
0 | WETH | N/A |
1 | DAI | N/A |
2 | USDC.e | N/A |
3 | LINK | N/A |
4 | WBTC | N/A |
5 | USDT | N/A |
6 | GLP | FALSE |
7 | ARB | N/A |
8 | magicGLP | N/A |
9 | plvGLP | FALSE |
10 | jUSDC | FALSE |
11 | PT-GLP | FALSE |
12 | UNI | N/A |
13 | MIM | N/A |
14 | wstETH | N/A |
15 | rETH | N/A |
16 | YT-GLP | TRUE; Maximum position duration is the lesser of 4 weeks OR 1 week until maturity ( Thu Mar 28 2024 00:00:00 GMT; 1711584000 unix timestamp) |
17 | USDC | N/A |
Dolomite can whitelist what types of users can interact with certain Isolation Mode assets. There may be use cases for an asset only being accessible to real users (externally-owned-accounts (EOAs), smart contract wallets, or some other category that makes sense).
If this protective mode is enabled, only users that meet the criteria can deposit, withdraw, borrow, or otherwise use that particular asset in Dolomite. The table below denotes which assets are only accessible via an EOA.
Market ID | Symbol | Only EOA? |
|---|---|---|
0 | WETH | N/A |
1 | DAI | N/A |
2 | USDC.e | N/A |
3 | LINK | N/A |
4 | WBTC | N/A |
5 | USDT | N/A |
6 | GLP | FALSE |
7 | ARB | N/A |
8 | magicGLP | N/A |
9 | plvGLP | FALSE |
10 | jUSDC | TRUE |
11 | PT-GLP | FALSE |
12 | UNI | N/A |
13 | MIM | N/A |
14 | wstETH | N/A |
15 | rETH | N/A |
16 | YT-GLP | FALSE |
17 | USDC | N/A |
Dolomite offers a unique
Pause Sentinel to reduce contamination risk between assets if there's an issue with a particular listed asset on Dolomite. If external redemptions are ever made unavailable, are paused, etc. Dolomite can dynamically disable borrowing, disable increasing position size, or more for, but only for the paused asset and its respective positions.This breakthrough enables Dolomite to isolate technical risk and potential black swans between external integrations to reduce spillover between collateral assets on Dolomite. Let's walk through an example:
Suppose you have a position open with
jUSDC borrowing USDC as debt. If Jones DAO activates their Emergency Pause functionality, users of jUSDC would be unable to redeem for USDC. This would put massive strain on Dolomite while the situation resolves, resulting in users ramping up their USDC debt as a way to "exit" their jUSDC position while Jones DAO's system is paused. Dolomite's Pause Sentinel is able to disable increasing debt involving jUSDC and automatically moves the jUSDC market into downsize only mode - enforcing users can only pay back loans. Meanwhile, a user taking out a loan against GLP collateral is unaffected by the jUSDC market being paused!The table below denotes which assets have the Pause Sentinel active:
Market ID | Symbol | Pause Sentinel Trigger |
|---|---|---|
0 | WETH | N/A |
1 | DAI | N/A |
2 | USDC.e | N/A |
3 | LINK | N/A |
4 | WBTC | N/A |
5 | USDT | N/A |
6 | GLP | DISABLED |
7 | ARB | N/A |
8 | magicGLP | N/A |
9 | plvGLP | If the vaultParams() disable redemptions |
10 | jUSDC | If the JonesUSDCIsolationModeUnwrapperTrader is unable to bypass the 24hr withdrawal period or is not whitelisted. If the JonesGlpVaultRouter toggles the emergencyPaused state |
11 | PT-GLP | |
12 | UNI | N/A |
13 | MIM | N/A |
14 | wstETH | N/A |
15 | rETH | N/A |
16 | YT-GLP | |
17 | USDC | N/A |
Liquidations occur when account's collateralization falls below the minimum threshold for the debt asset(s) they owe. The liquidation threshold is defined as:
liquidation_threshold = total_usd_value_supplied / (total_usd_value_borrowed * 115%)
When a liquidator force-closes an underwater position, the underwater account incurs a liquidation penalty (more on this below). The amount of assets seized by a liquidator upon liquidation is defined as:
amount_seized =
debt_amount * debt_price_usd / collateral_price_usd * (1 + liquidation_penalty)
Dolomite supports full account liquidations and partial liquidations, depending on the preference of the liquidator.
Expirations occur when a position's expiry has passed, and the position is subject to being liquidated. Mechanically, expirations work similar to liquidations; having a position force-closed due to expiration follows the same formula above, when the position's collateral asset(s) are seized:
amount_seized =
debt_amount * debt_price_usd / collateral_price_usd * (1 + liquidation_penalty)
On the Borrow page, you'll see something called a
Health Factor attached to each position. The position's health is represented as a ratio of how close your equity to debt ratio is to reaching 115% collateralization (or higher if the asset has a risk premium applied). When your Health Factor falls below 1.00 your position is subject to being force-closed via liquidation.Here's an example of the calculation assuming the liquidation threshold is 115% collateralization, you have $120 worth of assets and your debt is $100:
$120 / ($100 * 1.15) = ~1.043 Health Factor
Liquidation Treshold - when collateral assets < $115 OR debt assets > $104.35
Three positions with different & independent health factors
Dolomite uses the concept of a
Health Factor because it normalizes different liquidation thresholds that could be different across the diverse set of potential assets in your position. For example, if you're supplying GLP and USDC as well as borrowing LINK and ETH, each of those assets could have different liquidation thresholds, which cannot be represented through a simple liquidation price.Liquidation penalties serve as a deterrent for borrowers to try to not get liquidated and an incentive for liquidators to perform their role and maintain the solvency of Dolomite's money market system.
DolomiteMargin specifies a global liquidation penalty that is the minimum value that can be set for each market. Each market can add a Liquidation Spread Premium, which is used to increase the liquidation penalty. Generally, illiquid and riskier markets have higher liquidation penalties than less risky and more liquid ones. In a way, the penalty is a reflection of the risk the protocol takes on by listing the asset in the system for usage. Liquidation Spread Premiums aggregate to reflect the compounded risk of borrowing a risky asset with a risky collateral asset. Using the example of WBTC and LINK on Arbitrum One, which both have Liquidation Spread Premiums of 40%, the liquidation penalty when you borrow one using the other asset collateral is 9.8% (1.4 * 1.4 * 5%).To check the math of this, you can visit DolomiteMargin on Arbiscan, click
Read Contract, select the getLiquidationSpreadForPair function and input 3 and 4 as the heldMarketId and owedMarketId. Doing so gives you the liquidation penalty of 9.8% if you divide the result by 1e18. Global liquidation penalty: 5%
Market ID | Symbol | Liquidation Penalty |
|---|---|---|
0 | WETH | 5% |
1 | DAI | 5% |
2 | USDC.e | 5% |
3 | LINK | 7% |
4 | WBTC | 7% |
5 | USDT | 5% |
6 | GLP | 5% |
7 | ARB | 5% |
8 | magicGLP | 5% |
9 | plvGLP | 5% |
10 | jUSDC | 5% |
11 | PT-GLP | 5% |
12 | UNI | 7% |
13 | MIM | 5% |
14 | wstETH | 5% |
15 | rETH | 5% |
16 | YT-GLP | 10% |
17 | USDC | 5% |
You can check this table is correct and up-to-date by visiting DolomiteMargin on Arbiscan, clicking
Read Contract, selecting the getLiquidationSpread function and dividing by 1e18. Doing so gives you the global liquidation penalty of 5%. Then, select the
getMarketSpreadPremium function and plug in the corresponding marketId into the input field. With the spread premium, add 1e18, divide by 1e18, then multiply the result by 5% (the global liquidation penalty).For example, the
Liquidation Penalty for WBTC is 400000000000000000. By adding 1e18 and dividing by 1e18 the result is 1.400000000000000000. When you multiply 5% by 1.400000000000000000, you get 7%.Vaporizations can occur after a liquidation if an underwater account is left with 0 collateral assets but still holds a non-zero amount of debt. Vaporizing an account from a liquidator account will essentially "donate" the liquidators assets to cover any shortfall in bad debt the underwater account accrued.
Last modified 1mo ago