The Ojo Network is developing DeFi's first Risk Engines: modular components designed to support lending for high TVL assets with lower volume. Think yield-bearing tokens, like Ethena's USDE, or Etherfi's weETH.
Disclaimer:
This product provides or manipulates on-chain data feeds and is designed for decentralized environments. Risk Engines are a new development; using the Ojo Network's Risk Engines does not eliminate all risks associated with smart contracts, on-chain transactions, or price feeds. Many components of the network have undergone security testing and audits. However, smart contracts are still experimental technology, and vulnerabilities may exist. Use at your own risk. We recommend all users implement proper risk management strategies.
Ojo Risk Engines
A basic Risk Engine is composed of three key components: a primary feed, a secondary feed, and a decision maker. The Ojo Network packages these in a simple interface so that the top DeFi protocols can use them.
Pendle Token Engine
Why is this Risk Engine needed?
Pendle Tokens are a popular collateral token type in Morpho, due to their yield-splitting mechanism which makes it easier to farm yield through leverage looping. With that ease of UX, comes a complexity in Risk Management. Some curators have different ways to price these tokens, but the PT Engine provides a more advanced middleground.
How do I integrate?
Yield Risk Engine
The Yield Risk Engine is a smart contract factory we have proposed to the Morpho DAO to protect against the mispricing of yield-bearing tokens.
Why is this Risk Engine needed?
Yield-bearing assets on Morpho—such as LRTs, LSTs, and yield-stable tokens—often have a built-in yield ceiling that isn’t reflected in their current market valuations. If an oracle overstates an asset’s price by ignoring expected yield accumulation (for instance, stETH with an average APY of ~3%), it can lead to collateral being overvalued. This discrepancy may result in scenarios where bad debt accumulates and markets are ultimately drained. The Yield Risk Engine mitigates this risk by capping the oracle-reported price to align with the asset’s expected yield growth, offering a balanced approach to risk management.
How do I integrate?
The Pendle Token Engine is a Smart Contract factory that was to safeguard against mispricing Pendle Tokens.
