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We have implemented a range of controls to enhance the security of the D-Squared 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;
- Full doxxing of Trading team;
- 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
No protocol can guarantee they will not be exploited but D-Squared has set up processes to mitigate this risk so that users can feel comfortable deploying capital to the vaults.
Risk management is a challenge for hedge funds and vaults 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 backtesting. Vault strategies often need to de-risk during periods of market stress, yet estimating market changes and historical slippage are 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 both practical experience and academic research and has been battle-tested at institutional level in TradFi..
Our core approach is to manage risk through efficient use of 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, market crises, while still maintaining some upside potential
D-Squared is designed to use both the composability of DeFi ("building on top of" other protocols) and composability of vault strategies.
Vault strategies trade $ETH and $ETH-related (e.g. $GLP) assets on top of tried-and-tested Arbitrum-native and Avalanche-native protocols: GMX, Dopex, Premia, Rysk, Hubble.
D-Squared will also work closely with BWS Labs (a joint venture partner) to use BWS vaults where advantageous, such as the USDC++ vault which provides leverage to D-Squared strategies.
D-Squared smart contracts are built on a modular system for basic interactions. Each module will be audited and can be assembled to either modify or create new strategies with minimal development overhead or security risk.
D-Squared users can also use composability to build their own portfolios using our vaults as the building blocks. Each vault has its own clearly-defined risk profile and exposure to a different segment of the market. This enables users to create their own asset allocations between vaults to create an overall portfolio that suits their preferences while taking advantage of the D-Squared model.