# Kerne Curation Policy, version 1.1

Dated 5 October 2026. Published at https://kerne.fi/curation/policy-v1.1.md and summarised at https://kerne.fi/curation. Version 1.1 changes no rule: it describes the vault's roles by function, the way established curators do. Version 1 stays published unchanged at https://kerne.fi/curation/policy-v1.md. The vault it governs is read live at https://kerne.fi/api/curation.

A changed rule ships as a new version with its own file and date. This file is not edited after publication.

## 1. What Kerne curates

Kerne is a delta-neutral stablecoin company on Base and an onchain risk curator. This policy covers the second line.

Curation here means deciding what a lending vault may lend against, how much, and when to pull back. Kerne's first vault is **Kerne USDC**, a Morpho vault (MetaMorpho V1.1, ERC-4626) on Base that lends USDC into Morpho Blue markets.

| | |
|---|---|
| Vault | Kerne USDC (`kerneUSDC`) |
| Address | `0x62A3380CD1Fbe5f6E313f99Cfdf0a8f449B7Fa99` |
| Address basis | CREATE2 from MetaMorphoV1_1Factory `0xFf62A7c278C62eD665133147129245053Bbf5918` with owner `0x14f04cE02f35B29Af564A98544dD7e2393993946`, initial timelock 0, asset USDC, name "Kerne USDC", symbol "kerneUSDC", salt 0. The address is fixed before deployment; whether a contract exists there is a live read. |
| Owner and curator | Kerne owner key, hardware-secured, `0x14f04cE02f35B29Af564A98544dD7e2393993946` |
| Guardian | Kerne guardian multisig (Safe), a separate address from the owner, `0x52d3E450bA6c299B1B07298F1E87DD74732D4877` |
| Timelock | 3 days (259,200 seconds) |
| Performance fee | 0% |

## 2. The rules

1. **Blue-chip collateral only.** Collateral must have backing that can be read from chain and a spot market on Base deep enough for a liquidation to clear inside its incentive. The opening set is WETH and cbBTC, both at 86% LLTV.
2. **Market-priced oracles only.** Every oracle must resolve to an executable market price from an independent terminal source. Refused outright: fixed-rate or hardcoded prices, self-attested net asset values, spot prices from pools shallow enough to move for less than the value at stake, and feeds where the issuer is the only source. Every assumption an accepted oracle makes is written down in section 3.
3. **Never our own assets.** kUSD, skUSD and KERNE are excluded as collateral, directly or through a wrapper, from every vault Kerne curates. That includes the kUSD/USDC markets Kerne deployed on Morpho (`0xdc6a28b2941b3d32affc71cdeeb10e9779ff2a8ba1dcabc258e7b61f9a11beb3`) and Euler.
4. **Caps open small and ramp.** A market's supply cap is the lowest of: the opening ramp of 50,000 USDC; 5% of that market's total supply when the cap is set; and what a total loss of the position would cost without ending the vault. A cap steps up only after 30 days without an adverse event (a bad-debt realisation, an oracle deviation beyond its stated assumption, or utilization pinned at 100% for more than 24 hours). Once outside deposits exist, no single collateral market should hold more than half the vault.
5. **Slow up, fast down.** Cap increases and new markets wait out the 3-day timelock, and the guardian Safe can veto any of them in that window. Cap cuts, market removals started, and moves to the idle market take effect at once.
6. **Disclosure first.** Caps, pending changes, allocations and deposits are read live from Base at https://kerne.fi/api/curation. Kerne capital (Kerne's owner wallet plus the dead-share seed) is separated from third-party capital by subtraction in every read. A deposit from a Kerne account is disclosed in Kerne's account registry before it is made.
7. **Liquidator coverage is a continuity input, not a solvency signal.** In Kerne's census of all 23,188 Morpho Blue liquidations over 90 days, bad-debt incidence was flat at about a quarter of markets regardless of how many distinct liquidators served them, and rose where there were many. A market served by one or two liquidators gets a lower cap because its clearing depends on a counterparty with no obligation to the vault, not because loss is more likely.
8. **No fee on our own money.** The vault charges 0% while it holds only Kerne capital. Any fee is announced on https://kerne.fi/curation before it is set.

## 3. The opening markets

| Market | Market id | LLTV | Oracle | Opening cap |
|---|---|---|---|---|
| WETH / USDC | `0x8793cf302b8ffd655ab97bd1c695dbd967807e8367a65cb2f4edaf1380ba1bda` | 86% | `0xFEa2D58cEfCb9fcb597723c6bAE66fFE4193aFE4`: Chainlink ETH/USD divided by Chainlink USDC/USD. No wrapper assumption; a USDC depeg moves the price. | 50,000 USDC |
| cbBTC / USDC | `0x9103c3b4e834476c9a62ea009ba2c884ee42e94e6e314a26f04d312434191836` | 86% | `0x663BECd10daE6C4A3Dcd89F1d76c1174199639B9`: Chainlink BTC/USD, no quote feed. Two stated assumptions: Coinbase custody of cbBTC holds, and USDC holds par. | 50,000 USDC |
| Idle USDC | `0x38c846197ac32a752a60c25d4536ebb0c3920c532e9a859c38c91efb7b8c2abb` | none | none; no borrowing, earns nothing | 1,000,000 USDC |

Both lending markets use the AdaptiveCurve IRM `0x46415998764C29aB2a25CbeA6254146D50D22687`. Market ids were recomputed from their parameters and matched against `Morpho.idToMarketParams` and the Morpho API on 5 October 2026.

Deposits fill WETH / USDC first, then cbBTC / USDC, then idle. Withdrawals draw from idle first, then WETH / USDC, then cbBTC / USDC.

For these two markets the binding limit is the opening ramp, not exit depth: on 5 October 2026 they held about $104M and $1.7B of supply, so 5% of either is far above 50,000 USDC.

## 4. Who can do what

- **Owner and curator (Kerne, hardware-secured key):** submits caps and market changes, sets the supply and withdraw queues, the guardian, the fee and the timelock. Risk-increasing changes (new markets, cap increases, timelock cuts, a new guardian) wait out the 3-day timelock onchain. Every allocation is a deliberate, signed decision, not an automated bot.
- **Guardian (Kerne guardian multisig):** can cancel any pending cap increase, timelock change or market removal during the timelock. It cannot move funds.
- **Anyone:** can deposit and withdraw their own funds, and can execute a cap increase once its timelock has passed. The vault is non-custodial: no role can withdraw a depositor's funds, and withdrawals need no one's permission, only available market liquidity.

Two things are not timelocked, as on every MetaMorpho vault: the owner can change the fee (announced on https://kerne.fi/curation before it is set, per rule 8), and allocations can move instantly between markets that are already enabled and capped.

Ownership is intended to move to a multisig as the vault grows. That change will be announced on https://kerne.fi/curation before it happens.

## 5. What this policy does not have yet

- An automated allocator or a round-the-clock monitoring desk. Allocations are deliberate signed decisions.
- A calibrated cap model, a stress harness or a realised-margin model. The caps are a ramp, which is why they are small.
- A listing in the Morpho app. The app lists Vault V2 vaults from approved curators; Kerne USDC is a V1.1 vault, reached at its contract address.

## 6. Relationship to kUSD

kUSD is Kerne's dollar on Base, backed one for one by USDC. The curation line and kUSD share a method (publish the rules and the live numbers, separate Kerne's own money from everyone else's) and nothing else: the vault does not hold kUSD, does not lend against it, and is not part of kUSD's reserves.