Risks & Controls
The contract, reserve, market, administration, and position risks behind an SV3 floor.
SV3's floor depends on correct contracts, available USDC, and the protocol's administrative controls. The floor provides a specific on-chain redemption rule; these risks define the conditions around it.
The protocol owner controls upgrades and can pause every state-changing action globally or per market for an indefinite period. A pause can block buys, sells, repayment, surrender, floor raises, and fee claims until the owner unpauses the protocol.
Floor value is denominated in USDC. A depeg changes its dollar value, and USDC pause or blacklist controls can prevent reserve transfers.
Floor coverage
| Contract property | Holder exposure |
|---|---|
| Every actual token is included in floor liability | Correct execution depends on uncompromised market contracts |
| Valid v1 floor transitions move upward | Shared beacon upgrades can change existing market code |
| Gross backing covers required backing | Reserve availability depends on USDC transfers |
| Direct floor redemption has a constant gross value per token | The 1.25% sell fee, gas, and rounding reduce wallet proceeds |
| Canonical curve spot stops at floor | The full premium above floor remains at risk |
| External pools cannot withdraw the SV3 reserve | Their prices may diverge from canonical spot and may be thin or manipulated |
Smart-contract and math risk
The market combines curve integration, inverse quotes, floor recalibration, elastic supply, signed offset accounting, fees, collateral, and debt. A defect could misprice an action or break backing reconciliation.
The planned control set includes:
- conservative one-sided rounding;
- shared deterministic fixtures across the reference model and contracts;
- stateful invariant and differential tests;
- reentrancy guards and token balance-delta checks;
- fixed market call paths;
- complete post-state events; and
- code-hash and storage-layout checks around upgrades.
Testing and review reduce defect risk. Custom financial software still requires independent audit evidence tied to the deployed code.
Market execution risk
| Risk | User control |
|---|---|
| Curve price impact | Review average execution price and post-trade spot |
| Transaction reordering or a sandwich | Set an explicit slippage limit and short deadline |
| Stale interface data | Refresh the on-chain quote before signing |
| External DEX divergence | Check whether the displayed price is canonical curve spot or external spot |
| Misleading market cap | Compare supply, reserve, debt, gross backing, and executable depth |
The contract rejects transactions that miss their minimum output, maximum input, deadline, pause, solvency, or canary-cap bounds.
Advance and loop risk
Advance debt stays fixed and carries no interest or due date. Collateral stays locked until repayment or surrender.
Looping uses that floor equity to buy more tokens. Deep loops can leave nearly all floor value matched by debt, so a fall from spot to floor can remove most remaining equity. Closing through the curve also incurs price impact and fees. Surrender irreversibly burns the collateral required to cancel debt.
Keeper liveness
The keeper reads the controller's valid floor plan and submits it. A stopped keeper delays eligible raises until another address submits the same permissionless call. Existing spot, floor, reserve accounting, redemptions, and positions continue under the last completed state.
Future derivative risk
Perpetual futures need separate collateral, mark-price, funding, open-interest, liquidation, and bad-debt rules. Their profit and loss cannot draw freely from the underlying token reserve. The Perpetual Markets page lists the remaining design work.