Orange Guardrail

The Guardrail Manager is an integral component of the OrangeLayer ecosystem, tasked with ensuring security, stability, and efficiency across the platform's Bitcoin staking modules. This document details the Guardrail Manager's technical specifications, operational parameters, and functionalities.

Core Functionalities

• Parameter Management: Establishes, modifies, and enforces essential operational and security parameters for each staking module.

• Risk Assessment: Continually evaluates and mitigates risks by analysing current data, historical incidents, and predictive modelling.

• Security Protocol Enforcement: Implements and upholds security measures customized to the specific needs of each staking module.

• Incident Response: Orchestrates swift response actions to security threats to minimize potential ecosystem impacts.

Operational Parameters

Staking Thresholds

• Minimum Staking Amount: Ensures accessible participation while contributing meaningfully to network security.

• Maximum Staking Amount: Mitigates concentration risk and fosters decentralization.

Slashing Conditions

• Double-Signing: Penalizes validators for signing conflicting transactions to maintain network integrity. This is a universal condition across all Bitcoin representations.

Unbonding Periods

• General Unbonding Period: A set duration that allows for detecting malicious activities before assets are withdrawn, enhancing the security framework.

Reward Adjustment Factors

• Contribution Duration Multiplier: Rewards longer staking durations with a multiplier, incentivizing sustained commitment.

Staking Module Health Indicators

• Transaction Volume: Identifies unusual activity patterns that may signal security concerns.

Security Incident Response Thresholds

• Automated Alerts: Triggered by significant deviations in transaction volume, indicating potential security issues.

Cross-Module Risk Containment Levers

• Liquidity Limits: Temporarily restricts new stakings if liquidity surpasses a certain threshold, preventing strain. For StacksBTC, if the liquidity exceeds 75% of the total staked assets, new stakings are temporarily halted to prevent liquidity strain.

Asset Liquidity Requirements

• Emergency Fund: Maintains a reserve to address liquidity needs during market volatility.

External Threat Intelligence Integration

• Threat Model Updates: Leverages external security intelligence to dynamically update threat models.

Compliance and Regulatory Adherence

• Regulatory Compliance: Adapts operations to comply with financial regulations, ensuring legal integrity.

Decentralization Metrics

• Validator Limitations: Prevents any single validator from dominating the network, promoting resilience and reducing centralization risks.

Depegging Metrics

• Real-time Monitoring: Implement continuous surveillance of the peg ratio between wBTC and native BTC across multiple exchanges and platforms to detect early signs of depegging.

• Threshold-based Alerts: Establish predefined thresholds for acceptable peg deviations. Alerts are triggered if the deviation exceeds these limits, indicating potential depegging risks.

• Automated Safeguards: In the event of significant depegging, automated protocols temporarily halt transactions involving the affected asset to prevent further destabilization.

• Peg Restoration Efforts: Collaborate with wBTC custodians and minting partners to enact measures to restore the peg, such as adjusting the supply of wBTC.

• Staker and User Communication: Maintain transparent communication with stakeholders about depegging incidents, actions taken to address them, and their impact on staked assets.

• Insurance and Compensation: Explore options for insurance coverage or create a compensation mechanism to protect stakers from losses due to depegging.

• Dynamic Reward Adjustments: Temporarily adjust reward structures to compensate for increased risks associated with depegging, incentivizing continued participation.

The Guardrail Manager forms a cornerstone of OrangeLayer's dedication to security, efficiency, and trust. It secures a robust environment for Bitcoin staking through meticulous management of operational parameters and proactive threat response. This document is a comprehensive guide for developers, stakers, and validators to grasp the Guardrail Manager's technical and operational aspects, underscoring its pivotal role in OrangeLayer's security strategy.

Case Study: wBTC Staking

This case study examines the application of the Guardrail Manager's parameters specifically for the wBTC staking module:

• Minimum Staking Amount: 0.01 wBTC, facilitating accessible entry while ensuring valuable network contribution.

• Maximum Staking Amount: 500 wBTC to dilute risk concentration and encourage a diverse staker base.

• Unbonding Period: Set at seven days for wBTC, allowing ample time to identify and address malicious conduct.

• Reward Adjustment: Implementing a multiplier for staking durations over six months promotes long-term investment and network stability.

• Health Indicators and Response Thresholds: Transaction volume thresholds are set to trigger automated reviews if exceeded by 150% of the 30-day moving average, indicating potential security concerns.

• Liquidity and Compliance: A 2% emergency fund of the total staked wBTC ensures liquidity during market stress, adhering to financial regulations for operational compliance.

• Decentralization: No single validator can control more than 5% of the total staked wBTC, maintaining network integrity and mitigating centralization risk.

• Depegging Risk Management

  • Real-time Monitoring: The system continuously tracks the exchange rate between wBTC and native BTC, ensuring deviations remain within a 0.5% threshold.

  • Threshold-based Alerts: Automated alerts prompt immediate review and action if the peg ratio deviates beyond the acceptable range for more than an hour.

  • Automated Safeguards: Significant depegging events automatically suspend wBTC transactions within OrangeLayer, allowing for controlled assessment and corrective measures.

  • Peg Restoration Efforts: In case of depegging, OrangeLayer coordinates with wBTC custodians to implement supply adjustments, either minting or burning wBTC, to realign the peg.

  • Communication: Transparently inform stakers about the depegging event, expected impacts, and restoration plans through the platform's communication channels.

  • Insurance and Compensation: Establish an insurance fund or compensation protocol, funded through transaction fees, to cover potential losses from depegging incidents.

  • Dynamic Reward Adjustments: Increase reward rates for wBTC stakers temporarily to account for the added risk, encouraging continued support during peg restoration efforts.

This case study illustrates the Guardrail Manager's role in safeguarding the wBTC staking module, showcasing its adaptability to specific asset requirements while upholding OrangeLayer's overarching security objectives.