# For Lenders & LPs #### Phase 1: Structural Risk Assessment (Mental Model) **User Intent:** Evaluate the fundamental architecture to determine if the risk segregation meets investment mandates. | Key Question | System Answer | Sitemap Component | | ------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | | **"How is liability vs. asset risk structured?"** | **Segregated Risk Architecture.** The protocol decouples passive liquidity (Pool) from active risk strategies (Credit Managers). A failure in one strategy is contained by its specific debt ceiling, protecting the broader pool. | [one-pool-many-markets](https://docs.gearbox.finance/about-gearbox/introduction/readme) | | **"Is the deployment canonical?"** | **Omni-EVM Architecture.** Gearbox utilizes a modular deployment model. Each chain operates as an independent, verified instance rather than a bridged dependency. | [omni-evm-architecture](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/system-overview/omni-evm-architecture) | #### Phase 2: Yield Mechanics & Liquidity Risk **User Intent:** Analyze the mechanism of yield accrual and the constraints on capital withdrawal. | Key Question | System Answer | Sitemap Component | | --------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | | **"How does capital accrue interest?"** | **The Liquidity Vault.** Yield accrues via the Diesel Token (ERC-4626), a non-rebasing interest-bearing token. The exchange rate appreciates as interest is paid by borrowers. | [pool](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/pool) | | **"What drives APY volatility?"** | **Interest Rate Model.** The base rate is dynamic, driven by the utilization curve. The "Kink" ($U\_{optimal}$) defines the target efficiency range before rates scale exponentially. | [interest-rate-model](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/interest-rate-model) | | **"What is the liquidity risk?"** | **Utilization Caps.** High utilization can temporarily block withdrawals. The Interest Rate Model is designed to force borrower repayment during these periods to restore exit liquidity. | [interest-rate-model](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/interest-rate-model) | #### Phase 3: Counterparty Risk & Solvency Enforcement **User Intent:** Assess the creditworthiness of the borrowers and the automated enforcement of debt obligations. | Key Question | System Answer | Sitemap Component | | ------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | **"What prevents fund misappropriation?"** | **Execution Guardrails.** Borrowers cannot access funds directly. They operate through **Credit Accounts** (smart contract wrappers) restricted to whitelisted interactions via Adapters. | [credit-suite](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/credit-suite) \
[adapters-integrations](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/core-architecture/adapters-integrations) | | **"How is solvency enforced?"** | **Liquidation Dynamics.** Solvency is enforced mathematically via the Health Factor ($H\_f$). If $H\_f < 1$, the protocol incentivizes third-party liquidators to seize collateral and repay debt. | [liquidation-dynamics](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/liquidation-dynamics) | | **"How are assets valued?"** | **Price Oracle.** Asset valuation relies on normalized price feeds. Understanding the oracle source (Spot vs. TWAP) is critical for modeling liquidation triggers. | [price-oracle](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/price-oracle) | #### Phase 4: Stress Testing & Failure Modes **User Intent:** Evaluate system resilience under adverse market conditions (Oracle attacks, Liquidity crunches). | Key Question | System Answer | Sitemap Component | | ----------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | | **"Is the system resilient to oracle manipulation?"** | **Smart Oracles.** The protocol employs a Dual-Feed architecture (Main vs. Reserve). Significant deviation between feeds blocks sensitive operations to prevent arbitrage. | [smart-oracles](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/smart-oracles) | | **"How is concentration risk managed?"** | **Quota Keeper.** The protocol enforces **Asset-Side Limits**. Even if the pool has excess liquidity, exposure to specific volatile assets is capped globally. | [quota-controls](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/quota-controls) | | **"What happens if bad debt occurs?"** | **Insolvency Resolution.** The **Loss Policy** defines fallback logic (e.g., switching to fundamental pricing) to prevent selling collateral at distressed prices during flash crashes. | [smart-oracles](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/economics-and-risk/smart-oracles) | #### Phase 5: Governance & Parameter Security **User Intent:** Verify that administrative privileges cannot be exploited to expropriate funds. | Key Question | System Answer | Sitemap Component | | ------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ | | **"Who controls risk parameters?"** | **Market Curators.** Specific entities manage the risk parameters (LTVs, Limits) for their respective markets. | [market-curators](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/governance-and-operations/market-curators) | | **"Are there protections against malicious updates?"** | **Timelock Constraints.** Critical parameter changes are subject to a mandatory 24-hour timelock, allowing LPs to withdraw capital before changes take effect. | [risk-configuration-dictionary](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/reference/risk-configuration-dictionary) | | **"Who controls the technical infrastructure?"** | **Instance Owner.** A chain-specific multisig acts as the technical gatekeeper for the Price Feed Store, ensuring oracle integrity independent of Market Curators. | [instance-owner](https://gearbox.gitbook.io/gearbox-docs/about-gearbox/governance-and-operations/instance-owner) |