Capital Buffers - Adaptive Risk Management

Primary Buffer

Each customized lending term can specify a capital buffer, where a portion of deposited funds is set aside before loans are issued. If the borrower underperforms, meaning its asset value goes down over the lending period, there is cushion to absorb losses before affecting lenders.

For example a lending term manager may require 5% extra to the risk buffer, which ensures stability in volatility markets, that will be deposited into a low risk yield strategy.

Self Sustaining Buffer Growth

In Stormbit, a portion of interest payments from borrowers can be allocated to a reserve pool, building a gradual self-sustaining capital buffer. As borrower demand increases, the capital buffer scales proportionally.

Adaptive LTV management

Safer, less volatile collateral (e.g. stablecoins or tokenized real assets) may get higher LTV ceilings, whereas volatile tokens have lower caps. The protocol can tighten LTV limits for new loans if market volatility is spiking, as an adaptive safeguard. By staging the introduction of riskier assets and continuously analyzing loan performance data, Stormbit’s risk engine will learn and update parameters (much like a bank’s credit model).