Security & Audits

Security Policy

Security is foundational to everything we build. We approach it as a multi layered discipline, not a checkbox.

Non Custodial Design

The Kerne Protocol takes no custody of user assets. Deposited collateral is held by smart contract code, not by any company, person, or exchange. You retain the cryptographic right to initiate withdrawals at any time.

Smart Contract Security

All contracts are written in Solidity 0.8.24 with OpenZeppelin v5.0 security primitives. The codebase has undergone multiple rounds of internal security review, with all critical findings patched and verified. External audit engagements are in progress, and audit reports will be published on the Kerne transparency page upon completion.

Our test suite includes hundreds of unit tests covering normal operations, edge cases, and adversarial scenarios. We use Foundry for testing, which allows us to simulate complex multi step interactions and verify that the contracts behave correctly under all conditions.

Multi-Layered Oracle System

Pyth Network serves as the primary price feed, providing sub-second latency and confidence intervals for real-time market data. Chainlink AggregatorV3 acts as the validation and fallback layer, with a one hour heartbeat providing an anchor. If the two sources disagree beyond a set threshold, new minting pauses automatically until prices settle. This protects against both oracle manipulation and other failure scenarios.

Automated Circuit Breakers

The protocol includes multiple layers of automated protection:

• Negative funding rate circuit breaker: Reduces hedge exposure during sustained negative funding periods to limit yield drag.
• Exchange concentration limit: No single venue may hold more than a defined percentage of total hedge notional, enforced automatically.
• Rapid outflow protection: If net withdrawals exceed a defined threshold of total value locked within a set period, new deposits are temporarily paused while positions are proportionally reduced.
• Oracle anomaly circuit breaker: If price feeds diverge beyond threshold, new minting pauses automatically until convergence.
• Collateralization ratio monitoring: If the ratio drops below defined thresholds, the protocol enters warning and then critical states with progressively more protective measures.

Multi Venue Diversification

The hedging engine maintains positions across multiple venues, with hard caps limiting maximum exposure to any single venue. Onchain collateral held in KerneVault is not affected by any single venue failure. It remains in the smart contracts under the protocol's control.

Emergency Unwind Procedure

In a catastrophic scenario requiring full protocol shutdown, a formalized emergency unwind procedure protects depositors: the vault pauses, hedge positions are closed in an orderly manner, and once fully unwound, the vault reopens for withdrawals only. If any shortfall exists, the Insurance Fund covers the difference before processing withdrawals.

External Audits

We are actively pursuing external security audits from reputable firms. Audit reports will be published publicly upon completion. We believe in full transparency around security, including disclosing findings and how they were addressed.