Smart Contract Risk
The on-chain infrastructure of Ledgity is intentionally minimalist to reduce attack surface and complexity. Smart contracts are designed to be transparent, upgrade-controlled, and auditable, ensuring that the on-chain system remains stable even as TVL scales.
The architecture focuses on custody safety, deterministic yield accounting, and predictable liquidity flow rather than complex on-chain logic.
Contract Design Principles
No leverage is used anywhere on-chain.
No rebase mechanics: yield is reflected through Price-Per-Share (PPS), preventing integration issues.
Vaults are segregated: a failure in one vault cannot impact another.
No algorithmic yield generation: contracts do not “seek” yield; they reflect yield produced off-chain.
This significantly reduces systemic risk and composability failures.
Upgrade & Permission Controls
Smart contracts are controlled by an upgrade process that prioritizes safety:
Multisig Ownership (Council)
Execution of approved parameter or contract updates
Timelock (if enabled)
Allows the community to review before changes take effect
Global Pause Mechanism
Enables temporary freeze of deposits/withdrawals in case of abnormal behavior
These controls exist to prevent unauthorized changes, mitigate cascading failure, and allow structured incident response.
Audits
All core vault and token contracts will need external security audits Any material upgrade or new vault listing triggers a new review cycle.
Audit scope includes:
Permission and role controls
State transition integrity
PPS accounting correctness
Deposit / withdrawal flows
Emergency controls
Audit reports will be publicly linked in the new section once published.
Attack Surface Reduction
The protocol avoids common high-risk DeFi patterns:
Rebase tokens
Breaks accounting across integrations
Leveraged yield loops
Can fail catastrophically in volatile markets
Auto-compounding vault recursion
Hard to monitor, can destabilize liquidity
Flash-loan-sensitive oracle design
Eliminated by off-chain pricing and PPS model
Yield cannot be manipulated on-chain because it does not depend on AMM price, lending rates, or oracle variations. It depends only on cash flows entering the system, reflected in PPS.
Emergency Controls
If anormal conditions are detected (contract attack, unexpected price behavior, off-chain disruption), the protocol can be temporarily paused:
Deposits and withdrawals freeze
Capital is not moved automatically
Council initiates investigation and coordination
Normal operations resume once confirmed safe
This mechanism is strictly defensive — it does not allow reallocating or seizing user funds.
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