> For the complete documentation index, see [llms.txt](https://docs.paddlefi.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.paddlefi.com/risk-framework.md).

# Risk Framework

As decentralized finance (DeFi) continues to gain momentum, operating through open and borderless protocols introduces new layers of risk—particularly in terms of security, volatility, and protocol integrity.

At Paddle, we take a comprehensive approach to risk management, implementing safeguards at both the infrastructure and protocol levels. In addition to undergoing independent smart contract audits by top firms such as PeckShield, we are developing an internal risk assessment framework to detect malicious behavior, irregular usage patterns, and vulnerabilities under extreme market conditions.

To further enhance user protection, Paddle has introduced sophisticated risk parameters across our lending pools, including isolation of asset exposure, health factor monitoring, and dynamic interest rate adjustments.

This documentation outlines the key risk factors present in the isolated-margin NFT loan market and details the strategies and mechanisms Paddle employs to mitigate them.


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