Guardrails

To mitigate risk and avoid attack vectors, the Sujiko protocol has several guardrails built into its design.

At its core, the Sujiko protocol hosts a Clearing House that manages all actions and includes a status representing different stages of deployment, a list of perpetual futures markets, and the total amount of deposited USDC collateral.

Each perpetual futures market has an independent core vAMM with a limit orderbook, and associated pools for fees, funding, PNL, and insurance that is isolated from other markets. Over time, a proportion of fees generated from trades are allocated to the funding, PNL, and insurance pools.

Also, each market has a unique configuration, including an initial margin ratio (IMR), a maintenance margin ratio (MMR), an insurance fund type, maximum oracle-mark divergence, and more.

Sujiko implements asymmetric funding based on the divergence between mark and oracle prices.

Funding payments are capped at 1% per hour, and funding rebates are capped at 0.1% per hour.

If there are not enough funds to pay out the rebate from the funding pool, funding rebates will be capped at 0%.

Read more here.

Sujiko implements several checks to ensure that an oracle is valid.

This includes verifying if the oracle is stale, too volatile, has too large of a confidence interval, or is negative. When the oracle for a market is determined to be invalid, the market will block actions that increase the protocol risk, such as opening a new position.

Moreover, the protocol uses a smart pricing algorithm to generate on-chain price data for NFT collections. This algorithm attempts to mitigate the effects of wash trading on a collection’s floor price i.e. preventing the index price from being affected.

The data produced by the smart pricing algorithm is published on-chain using Switchboard.

Sujiko uses isolated PNL settlement pools for each perpetual futures market to prevent one market's cumulative PNL from affecting the rest of the markets.

To settle a positive PNL, the corresponding PNL pool must have sufficient funds. When settling a negative PNL, traders pay into the corresponding pool, increasing its balance.

We’re also experimenting with daily settlement limits for instant settlement. These limits will be generous and in line with daily average withdrawals.

Sujiko has a sophisticated liquidation engine that immediately liquidates positions when they breach margin requirements — ensuring that the protocol does not incur bad debt.

If a market is deemed unstable, an auto-deleveraging (ADL) mechanism will be activated. This mechanism automatically closes positions for users with the highest leverage and PNL. ADL is triggered when the sum of the insurance and PNL pool is less than the total unrealised PNL (uPNL) for all users holding a position in the market.