Security: Smart Contract and Risk Management

Security is one of the core design goals of Cyclic Protocol. The protocol has taken security measures at multiple levels to ensure the stability and anti-attack capabilities of the system:

1. Smart contract security

   • Code audit: All smart contracts will undergo strict third-party security audits before being deployed on the mainnet to prevent potential vulnerabilities.

   • Decentralized execution: All transactions are executed through on-chain contracts to eliminate the security risks of centralized management.

   • Permission management: The adjustment of key parameters of smart contracts requires community governance voting to prevent single-point decision-making risks.

2. Fund security

   • Over-collateralization mechanism: Users can only lend funds less than the value of the collateralized assets to reduce the risk of default.

   • Automatic liquidation protection: Once the value of the user's collateralized assets is lower than the safety threshold, the liquidation contract will automatically trigger partial or full liquidation to protect the stability of the lending pool.

   • Insurance fund: The protocol may set up a safety reserve fund pool to compensate for fund losses in extreme market conditions and further enhance fund security.

3. Oracles and market data

   • Decentralized Oracles: Cyclic Protocol uses Chainlink or Pyth oracles to obtain market prices to ensure the accuracy of loan value calculations.

   • Preventing price manipulation: The protocol uses a price TWAP (time-weighted average price) mechanism to avoid flash loan attacks and other market price manipulation behaviors.