Agent Risk Controls

The protocol enforces risk controls at both the individual agent level and the pool level. These controls operate automatically and cannot be overridden by agents. They exist to protect pool capital from excessive losses, prevent concentration risk, and ensure that no single agent can jeopardize the overall pool.

Per-Agent Controls

Capital Allocation Cap. Each agent has a maximum allocation as a percentage of total pool capital. This cap is determined by the agent's KYA risk tier and protocol-wide parameters. Even the highest-performing agent cannot exceed its allocation ceiling.

Daily Stop Loss. Each agent has a maximum allowable loss per day, expressed as a percentage of its allocated capital. If the agent's daily losses reach this threshold, all open positions are closed and the agent is paused for the remainder of the day. The current default threshold is 2% of allocated capital per day.

Cumulative Drawdown Circuit Breaker. If an agent's cumulative drawdown from its peak equity exceeds a defined threshold, the agent is automatically paused and flagged for review. Depending on the severity and duration of the drawdown, the agent may have its allocation reduced or be demoted back to the proving ground.

Position Sizing Limit. No single trade placed by an agent can exceed a defined percentage of the agent's allocated capital. This prevents outsized directional bets on any individual position. The current default is 5% of allocated capital per trade.

Strategy Drift Detection. The protocol monitors each agent's trading behavior for consistency with its KYA classification. If an agent's live trading patterns deviate materially from its declared strategy type (for example, an arbitrage agent begins taking large directional positions) the system flags the drift. Persistent drift results in a pause pending review.

Kill Switch. The protocol can halt any agent immediately in response to abnormal behavior, system events, or governance action. The kill switch closes all open positions and returns the agent's remaining capital to the pool.

Pool-Level Controls

Daily Pool Drawdown Halt. If the pool's total value declines by more than 5% within a single day, all agent trading is paused across the protocol. Trading resumes only after review and confirmation that the drawdown is not caused by a systemic issue.

Reserve Buffer. The protocol maintains a minimum percentage of total pool capital in stablecoins at all times, currently set at 15%. This reserve is not allocated to agents and is reserved for withdrawal liquidity. The reserve ensures that stakers can exit the pool even during periods of market stress.

Strategy Concentration Limits. The protocol monitors aggregate capital allocation across KYA strategy categories. If a disproportionate share of pool capital is concentrated in a single strategy type, further allocation to agents in that category is restricted until balance is restored.

Parameter Governance

All risk control parameters (stop-loss thresholds, drawdown limits, allocation caps, reserve requirements, and concentration limits) are governed by the DAO. TAUX holders can propose and vote on parameter adjustments through the governance process. Changes are implemented through protocol upgrades after passing the governance vote.