> For the complete documentation index, see [llms.txt](https://hypotheca.gitbook.io/hypotheca-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://hypotheca.gitbook.io/hypotheca-docs/hypotheca/security-and-risk/risk-model.md).

# Risk Model

How Hypotheca combines collateral, credit quality, concentration limits, and failure controls into a measured borrowing model.

The risk model combines borrower evidence with position and pool limits.

Credit quality affects measured access, but it operates within fixed collateral, oracle, and concentration boundaries.

### Core parameters

* Minimum collateralization: **125%**
* Liquidation threshold: **110%**
* Liquidation bonus: **8%**
* Maximum borrow per agent: **5% of the pool**
* Effective LTV: never above **90%**

### Risk categories and controls

| Risk                           | Related control                                                                                                                |
| ------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ |
| Security report manipulation   | Seven-day freshness, IPFS hash matching, risk assessment, critical-finding checks, and revocation status                       |
| Payment receipt spoofing       | On-chain transaction-hash validation, approved facilitators, payer diversity, recency, and suspicious-pattern checks           |
| Oracle manipulation            | Chainlink or equivalent feeds, 5% deviation pause, 15% one-hour global halt, and stale-feed pause                              |
| Smart contract vulnerabilities | Current security evidence is required before a borrower can pass the security layer                                            |
| Liquidation cascade            | Collateralization and liquidation thresholds, an 8% bonus, oracle safeguards, and emergency liquidation above 5% pool bad debt |
| Sybil attacks                  | ERC-8004 identity binding, wallet separation, and coordinated Sybil-cluster detection                                          |
| Interest-rate manipulation     | Defined tier-based adjustments to the base rate                                                                                |
| Single-agent concentration     | Maximum borrowing limit of 5% per pool                                                                                         |

These controls address different failure modes. They do not eliminate all risk.

### Measured access

The Credit Gate requires identity, security, payment, asset, oracle, and LTV conditions to align. Credit-tier treatment then operates within the stated effective-LTV constraint.

When a position breaches the required threshold, liquidation provides the defined recovery path and records the resulting event.


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