Unipay
  • OVERVIEW
  • 💫Unipay Overview
    • Solution USDu
  • Solution Overview
    • USDu Overview
      • Delta-Neutral Stability
      • Off Exchange Settlement
    • Risks
      • Program/Smart Contract Risk
      • Funding Rate Risk
      • Liquidation Risk
      • Custodial Risk
  • Solution Design
    • Minting USDu
      • Mint Validity Checks
    • Stake USDu
      • User Security Measures
  • Backing Custody & Security
    • Overview
      • Off-Exchange Settlement in detail
  • Resources
    • Brand Kit
    • General Risk Disclosures
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On this page
  • Understanding Custodial Risk
  • Mitigation Strategies
  • Commitment to Asset Security
  1. Solution Overview
  2. Risks

Custodial Risk

Custodial risk arises from the reliance on third-party platforms to manage and secure assets used for USDu issuance and delta-neutral strategies. As Unipay operates across multiple blockchains and integrates with both decentralized and centralized infrastructure, mitigating custodial risks is a critical aspect of the protocol’s design.

Understanding Custodial Risk

  1. Third-Party Custody Platforms Unipay leverages custodial solutions like Copper and Ceffu for off-exchange settlement of mapped assets. While these platforms are designed to provide robust security, they inherently introduce dependency risks, such as operational failures, hacks, or insolvency.

  2. Centralized Exchange Integration To execute delta-neutral hedging strategies, Unipay interacts with centralized exchanges (CEXs). The assets held on these exchanges may be exposed to risks, including mismanagement, regulatory seizure, or platform outages.

  3. Multi-Chain Custody Unipay operates on Solana, Ethereum, and other blockchains, distributing collateral across multiple networks. The protocol must rely on chain-specific custody solutions, which vary in their risk profiles and levels of decentralization.

Mitigation Strategies

To minimize custodial risk, Unipay has implemented the following safeguards:

  • Trusted Custodial Partners Unipay works exclusively with established and highly reputable custodial platforms, such as Copper and Ceffu, which have demonstrated robust security measures and operational transparency.

  • Asset Segregation Custodial partners are required to segregate client assets, ensuring that Unipay’s funds remain distinct and protected from any platform liabilities.

  • Decentralized Custody for On-Chain Collateral Collateral assets native to Solana, Ethereum, and other blockchains are secured through decentralized mechanisms, reducing dependency on centralized custody for a significant portion of the system’s assets.

  • Regular Audits and Monitoring Unipay conducts regular audits of custodial arrangements and implements continuous monitoring to identify and address potential vulnerabilities in real time.

  • Redundancy in Custodial Providers By diversifying custodial relationships, Unipay mitigates the impact of a single platform failure, ensuring continued stability and access to collateral.

Commitment to Asset Security

Unipay is committed to maintaining the highest standards of asset security across its ecosystem. By leveraging a combination of trusted custodial partners, decentralized custody solutions, and rigorous monitoring, Unipay ensures that users and stakeholders can trust the safety and integrity of USDu and its associated operations.

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Last updated 5 months ago