Blend’s infrastructure provides a policy framework that Risk Architects operate within. These guardrails ensure strategies execute safely while giving Risk Architects flexibility in how they allocate capital.
Goals
- Maximize risk-adjusted returns subject to liquidity, utilization, and LTV constraints
- Minimize churn via gas-aware thresholds and hysteresis
- Preserve user self-custody and per-Safe isolation
Constraints & Guards
- Slippage bounds per route and venue
- Utilization/LTV caps per market and per Safe
- Liquidity floors to ensure orderly exit
- Pause/roles checks enforced at the Safe (Safe Accounts)
- Margin safety rules for synthetic overlays
Decision Process
- Gather venue signals (rates, liquidity, incentives) and on-chain state
- Compute candidate allocations within configured bounds
- Compare expected benefit vs. costs (gas + slippage) and only act if net-positive
- Package actions as an
ActionPlan (see SDK) and execute under guard checks
For the math behind scoring and constraints, see Mathematical Models.
Policy Framework
Risk Architects operate within a clear framework designed to manage risk and optimize for sustainable returns.
Permissioned Markets Policy
- Target Utilization: Maintain ~80% utilization (within a 75-85% band) to balance borrow APR and supply returns
- Stability Halts: New deposits are paused if the borrow curve becomes unstable or utilization cannot be maintained
Reserve Policy
- Dynamic Sizing: The reserve size is adjusted dynamically based on utilization volatility and flow imbalance
- Coverage: The reserve must cover user redemptions, rebalancing liquidity under stress, and flash loan capacity
Rebalance Policy
- As-Needed: Rebalances are triggered when a live allocation deviates from its ideal weight by at least 1-3%
- Gas-Aware: Execution only occurs if the expected improvement exceeds the amortized gas and slippage costs
- Batching: Multiple small deviations are batched to improve gas efficiency
Hedge Management Policy
For strategies using Synthetic Savings overlays:
- Margin monitoring: Continuous tracking of margin ratio against safety buffers
- Automatic scaling: Hedge size is reduced when margin approaches warning bands
- Caution Mode: Full defensive posture when market health degrades
This framework provides predictable, rule-based guardrails that Risk Architects operate within, ensuring efficiency and safety across all strategies.
