8. Security Considerations

Threat Model

Key Security Concerns:

  1. Flash Loan Attacks:

    • Risk: Manipulation of protocol through flash loans

    • Mitigation: Rate limiting, validation checks, economic incentives

  2. Bridge Security:

    • Risk: Bridge exploits or failures

    • Mitigation: Multi-bridge redundancy, bridge limits, monitoring

  3. Recycling Pool Depletion:

    • Risk: Coordination attacks to drain pools

    • Mitigation: Dynamic fees, circuit breakers, health monitoring

  4. Cross-Chain Replay:

    • Risk: Replay of operations across chains

    • Mitigation: Unique operation IDs, chain-specific validation

  5. Smart Contract Vulnerabilities:

    • Risk: Code exploits and bugs

    • Mitigation: Audits, formal verification, limited upgradeability

Security Measures

Smart Contract Security:

  • Multiple independent audits

  • Formal verification of critical functions

  • Extensive testing coverage

  • Limited upgradeability with timelocks

  • Bug bounty program

Economic Security:

  • Dynamic fee adjustments

  • Health-based circuit breakers

  • Insurance fund for settlement failures

  • Rate limiting and exposure caps

  • Economic attack resistance

Operational Security:

  • Multi-signature requirements for admin functions

  • Timelocked governance actions

  • Gradual parameter adjustments

  • Comprehensive monitoring

  • Incident response procedures

Circuit Breakers

Chain-Level Circuit Breakers:

  • Automatically triggered when chain health deteriorates

  • Reduces or pauses operations on affected chain

  • Does not impact other chains in the system

  • Gradually resumes as health improves

Protocol-Level Circuit Breakers:

  • Activated in case of systemic issues

  • Requires multi-signature authorization

  • Implements staged shutdown procedures

  • Includes recovery and restart protocols

Bridge-Specific Circuit Breakers:

  • Monitors each bridge independently

  • Disables problematic bridges automatically

  • Routes through alternative bridges

  • Re-enables after verification period

Audit Strategy

Audit Timeline:

gantt
    title Security Audit Timeline
    dateFormat  YYYY-MM-DD
    
    Internal Review         :2025-06-17, 14d
    Audit Firm 1            :2025-07-01, 21d
    Audit Firm 2            :2025-07-08, 21d
    Economic Security Audit :2025-07-15, 14d
    Formal Verification     :2025-07-22, 14d
    Fixes & Re-audits       :2025-08-05, 7d

Audit Scope:

  • Core contracts (RecyclingLiquidityPool, FlashLoanHandler)

  • Integration contracts (Bridge adapters, Flash loan interfaces)

  • Coordination contracts (OperationRegistry, FeeController)

  • Economic security review

  • Formal verification of critical functions

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