Security Measures

I Design Ethos

We have designed many parameters in H2O Finance to be configurable. While the initial configurations are set by the core developer team, we have every intention to let the Governance community decide on what needs to be changed which will happen through voting.

II Audit Cooperation

H2O Finance Team guaranteed to cooperate with the top safety partners when the project started. Current smart contract has already passed 4 audits with high scores by three world class audit institutions, CertiK, Chains Guard and PeckShield. PeckShield has already completed the audit of H2O M products.

III Timelock

Timelock is a contract for delaying changes to the protocol. This contract is an owner of all the major contracts in Finance. Hence, every change needs to execute through this contract, which makes it function as a security moat.

In essence, every order from the admin(the group of core developers) has to pass through this contract and is delayed for 24 hours before taking effect. To be specific, the execution command for the order goes to the queue, waiting to be executed when the 24h delay is passed. This is a security feature that enables the community to see any upcoming updates and prepare in advance for them. If anything looks suspicious, they can pull their funds from the protocol before the update takes effect.

IV Protocol Configurations

1, Contracts of H2O Finance open to EOA (Externally Owned Accounts) only, which evades potential risks that attackers open a position to borrow massively for flash loan attack.

2, H2O Finance liquidates leveraged positions through liquidation bot instead of bounty hunter like some other projects. The design will be able to cut the profit source of the attacks.

3, The maximum limit of positions in H2O Finance is more strict than other products, which avoids sharp fluctuation of token price caused by opening a large position. The maximum value of each position is strictly calculated according to the risk management algorithm and is highly relevant to liquidity of the trading pair, which avoids attackers manipulating prices.

V The "Gemini Liquidation System" ensure accurate and safe liquidation

The liquidation strategy of some other products is, the oracle feed price and record it on the oracle contract, the price from oracle contract determine the liquidation price. But this liquidation strategy is not good enough, we have seen too many cases, in which users suffer from capital loss caused by Oracle failing to provide the correct price.

H2O Finance invented the Gemini Liquidation System based on the liquidation strategy of other products, The specific rules are as follows:

the oracle read and compare price from both DEX and CEX in a 1 minute time interval, when a position qualified to get liquidating for the first time, and the price difference from CEX and DEX is within 5%, then it will be listed in a liquidating waiting list, it will be liquidated only if the next price verification from oracle also proves this position is qualified for liquidation. The price verification from CEX is also double checked, the price is acquired from both Huobi and Binance, in this way, from which thoroughly avoids capital loss of users due to price verification not in time and inaccuracy.

For more security and liquidation parameter details, please pay attention to the follow-up announcements.