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We have implemented a range of controls to enhance the security of the D2.finance platform:
- Full transparency of trading positions and actions on the blockchain;
- Trading team actions are constrained by the strategy smart contract to only whitelisted interactions;
- Dual sign offs within the team for all code deployment;
- Segregation of duties between Trading, Front End, and Solidity teams;
- An independent security advisor working with our internal Head of Security;
- Modern DevOps practices to ensure the integrity of the frontend / dApp
While no protocol can eliminate the risk of exploitation, D2.Finance has implemented stringent measures to minimize the risk and assure users of the safety of their capital deployment to the vaults.
Risk management is a challenge for hedge funds and vault protocols. This is because traditional risk measurement methods based on return data are unreliable when applied to dynamic trading strategies.
This is especially true if the parameters only include historical back-testing. Vault strategies often need to de-risk during periods of market stress, yet estimating market changes and historical slippage is challenging.
A sustained period of live trading experience is required to learn important risk management lessons. Theory alone is not enough. Our Systematic Dynamic Risk Management framework has been developed through many years of practical experience and academic research and has been battle-tested at the institutional level in TradFi.
Our core approach is to manage risk by efficiently using options and hedges dynamically optimized according to market conditions. By adding market hedges to the portfolio, we can take advantage of opportunities created by downside volatility and market crises while still maintaining some upside potential
D2.finance is designed to use both the composability of DeFi ("building on top of" other protocols) and the composability of vault strategies.
Vault strategies trade may trade $ETH and $ETH-related (e.g., $GLP) assets on top of tried-and-tested Arbitrum-native: GMX, Camelot, AAVE,..
D2.finance will also work closely with artechnology.io to access indirectly institutional capital.
D2.finance smart contracts are built on a modular system for basic interactions. Each module can be assembled to either modify or create new strategies with minimal development overhead or security risk.
D2.finance users can also use composability to build their portfolios using our vaults as the building blocks. Each vault has its clearly defined risk profile and exposure to a different market segment. This enables users to create asset allocations between vaults to create an overall portfolio that suits their preferences while taking advantage of the D2.Finance model.