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Our Security Philosophy

Liquid prioritizes security through a non-custodial architecture where users maintain complete control of their funds. We provide the intelligence layer for yield optimization while eliminating custody risk entirely.

Non-Custodial

You Control Your KeysLiquid never holds or has access to user funds or private keys

Direct Protocol Access

No Intermediary ContractsFunds sit directly in established DeFi protocols

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Security Model

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How Your Funds Are Protected

1

Non-Custodial Architecture

You maintain complete control
  • Your private keys never leave your wallet
  • Liquid cannot access or freeze your funds
  • You can withdraw directly from protocols anytime
2

Direct Protocol Interaction

No routing smart contracts
  • Funds sit directly in Aave, Compound, Morpho, etc.
  • No Liquid contracts holding user assets
  • Transparent, auditable operations on-chain
3

Battle-Tested Protocols

Only proven infrastructure
  • Minimum 1+ years of operation
  • Full security audits by top firms
  • Strong track records and proven teams

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Risk Categories

Understanding the risks helps you make informed decisions about your funds.

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Integrated Protocol Risk

Primary Risk VectorYour deposits sit directly with integrated DeFi protocols (Aave, Compound, Morpho, etc.). If any of these protocols were to be hacked or compromised, there could be a loss of user funds.
How We Mitigate:
  • Only integrate protocols with full security audits
  • Require minimum 1+ years of proven operation
  • Continuous monitoring for security threats
  • Diversification across multiple protocols reduces concentration risk
What We Cannot Protect Against:
  • Zero-day exploits in integrated protocols
  • Economic attacks on underlying protocols
  • Governance attacks or malicious upgrades

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Market Risk

Stablecoin Volatility

Minor Price Fluctuations
  • USDC, USDbC may briefly trade above/below $1.00
  • Typically ±0.1% during normal conditions
  • Can reach ±2-3% during extreme market stress NB: This rarely happens

Yield Volatility

APY Changes
  • Yields fluctuate with supply and demand
  • Protocol incentives may end unexpectedly
  • Market conditions affect borrowing demand
Our Approach:
  • Focus on USD-pegged stablecoins only (USDC, USR, GHO & USDbC)
  • Agents monitor market conditions continuously
  • Can quickly exit positions if risks increase
  • Diversification across multiple yield sources

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Liquidity Risk

Temporary Fund Inaccessibility Funds may become temporarily inaccessible during:

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Regulatory Risk

Evolving Legal Landscape
DeFi regulations continue evolving globally and could impact:
  • Service availability in certain jurisdictions
  • Protocol operations and compliance requirements
  • Cross-border transaction capabilities

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How Liquid Protects You

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Security Measures

Protocol Auditing

Due Diligence
  • Security audit verification
  • Team background checks
  • Financial health assessment

Continuous Monitoring

24/7 Oversight
  • Real-time security monitoring
  • Automated risk detection
  • Emergency response procedures

Risk Diversification

Spread Risk
  • Multiple protocol integration
  • Balanced allocation strategies
  • Concentration limit enforcement

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Emergency Procedures

In Case of Security Issues:
  1. Immediate Response - Pause new deposits if threats detected
  2. User Notification - Alert all affected users immediately
  3. Safe Withdrawal - Assist users in safely exiting positions
  4. Transparent Updates - Regular communication during incidents

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What We Monitor

// Continuous security monitoring
const securityChecks = {
  protocolHealth: 'Real-time TVL and utilization monitoring',
  auditStatus: 'Tracking security audit updates',
  governanceChanges: 'Monitoring protocol governance proposals',
  marketConditions: 'Unusual volatility or liquidity events',
  regulatoryUpdates: 'Legal developments affecting operations'
};

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Insurance and Coverage

Current Status:
  • Liquid does not currently offer deposit insurance
Future Plans:
  • Exploring partnership with DeFi insurance providers
  • Considering protocol-specific coverage options
  • Researching risk management products

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Incident Response

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If Something Goes Wrong

Remember: Higher yields in DeFi come with higher risks. Liquid helps optimize returns while managing risk, but cannot eliminate all risks inherent in decentralized finance.
Key Takeaway: Liquid’s non-custodial architecture means you maintain complete control of your funds while benefiting from intelligent yield optimization. We focus on security through protocol selection, continuous monitoring, and transparent operations rather than taking custody of user assets.