Risk Management

SnowMind prioritizes safety over yield. Multiple independent safeguards protect your funds at every layer of the stack.

Allocation Constraints

The optimizer enforces hard limits on every allocation:

• 7.5% TVL cap: SnowMind never deposits more than 7.5% of a protocol's total USDC TVL to prevent market impact
• $100K minimum TVL: Protocols below the minimum liquidity threshold are excluded from new deposits
• Beat margin: A rebalance is skipped unless net APY improvement is at least 0.1%

Rate Validation

TWAP Smoothing

Raw spot rates are smoothed using a 15-minute Time-Weighted Average Price (TWAP) before allocation decisions. Outlier snapshots are excluded and at least two snapshots are required before a TWAP is treated as reliable.

twap_rate = Σ(rate_i × Δt_i) / Σ(Δt_i)   over 15-minute window

Cross-Validation

Every TWAP rate is compared against DefiLlama's yield API. If the on-chain rate diverges by more than the configured threshold, SnowMind logs a warning for monitoring and operator review.

Sanity Bounds

Any protocol reporting a TWAP APY greater than 25% is excluded from deposits and marked as anomalous.

Protocol Health Checks

Before every allocation run, SnowMind evaluates each protocol with additional risk gates:

1. Protocol status checks: emergency state, deposits paused, withdrawals paused
2. Utilization guard: utilization above 90% excludes new deposits
3. Velocity check: APY change above 25% in 30 minutes excludes new deposits
4. Exploit detection: TWAP APY above 2× yesterday's average plus utilization above 90% flags emergency exit behavior
5. 7-day stability check: relative APY swing above 50% excludes new deposits
6. Circuit breaker: 3+ consecutive RPC failures exclude the protocol until recovery
7. Existing position cap check: if a live position exceeds the TVL cap share, SnowMind forces a rebalance out of the excess

Rebalance Execution Gates

Even after target allocations are computed, a rebalance only executes if execution gates pass:

1. Cooldown: at least 6 hours since the last successful rebalance
2. Minimum movement: total movement must be at least $1
3. Profitability: estimated daily gain must exceed estimated execution cost
4. Max rebalance size: if a single rebalance would move more than the configured cap, it is halted for manual review
5. Idempotency guard: identical target allocations executed recently are skipped
6. Portfolio circuit breaker: if portfolio value drops more than 10% between runs, rebalancing is halted and alerts fire