Backing Assets Risk

Context

Seablocks utilizes a combination of assets, including liquid staking tokens (LSTs) such as stETH, to provide collateral for its hedging derivatives positions. The Backing Assets Risk refers to the potential for discrepancies between the value of the assets used as collateral and the underlying assets of the perpetual futures contracts.

Seablocks is agnostic to specific Ethereum LSTs. While stETH initially dominated the liquid staking market, its share has been reduced due to increasing adoption of alternatives. As a result, the protocol continuously evaluates the best mix of LSTs to minimize depegging risks and maximize stability.

Because LSTs are used as backing assets rather than directly matching the underlying asset in the derivatives positions (ETH), Seablocks carefully monitors and selects assets with the strongest market confidence and the lowest likelihood of deviating in price.

Risk Mitigation Strategies

To minimize potential backing asset risk, Seablocks implements the following measures:

Diversification Across Multiple LSTs: Instead of relying solely on stETH, Seablocks incorporates a mix of LSTs with broad industry support and deep liquidity.
Monitoring and Adjustments: The protocol actively assesses market conditions and may rebalance allocations to reduce exposure to underperforming or depegging assets.
Low Leverage and Tighter Collateral Haircuts: As detailed in the liquidation risk section, the protocol’s low leverage and stringent collateral management further reduce the risk of forced liquidations due to LST price fluctuations.

Exposure to Staked Ethereum Assets

As of January 2025, staked Ethereum assets account for approximately 15% of the total backing assets for USDi. This measured allocation ensures that while the protocol benefits from staking yields, the overall exposure remains limited to maintain asset stability.

Seablocks remains committed to actively managing and optimizing its asset allocations to uphold security, efficiency, and long-term stability.

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Last updated 1 month ago

Context

Risk Mitigation Strategies

To minimize potential backing asset risk, Seablocks implements the following measures:

Diversification Across Multiple LSTs: Instead of relying solely on stETH, Seablocks incorporates a mix of LSTs with broad industry support and deep liquidity.

Monitoring and Adjustments: The protocol actively assesses market conditions and may rebalance allocations to reduce exposure to underperforming or depegging assets.

Low Leverage and Tighter Collateral Haircuts: As detailed in the liquidation risk section, the protocol’s low leverage and stringent collateral management further reduce the risk of forced liquidations due to LST price fluctuations.

Exposure to Staked Ethereum Assets

Seablocks remains committed to actively managing and optimizing its asset allocations to uphold security, efficiency, and long-term stability.