Circuit Breakers

Note: The FluxVault core contract does not implement pause mechanisms or circuit breakers. This document describes potential safety mechanisms that could be implemented in custom vault extensions or external monitoring systems.

Overview

Circuit breakers are emergency mechanisms that could pause or limit vault operations during abnormal conditions. While not built into the core FluxVault contract, vault deployers may consider implementing these patterns in wrapper contracts or external systems.

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Types of Circuit Breakers

Important: The examples below are NOT implemented in the core FluxVault contract. They demonstrate patterns that could be implemented in custom vault wrappers or monitoring systems.

1. Pause Mechanism

Example of how a pause mechanism could work in a custom implementation:

// Emergency pause
function pause() external onlyOwner {
    _pause();
    emit Paused(msg.sender);
}

// Resume when safe
function unpause() external onlyOwner {
    _unpause();
    emit Unpaused(msg.sender);
}

When to use:

• Smart contract exploit detected

• Critical oracle failure

• Severe market manipulation

• Unknown vulnerability

2. Deposit Cap

Limit total deposits:

uint256 public depositCap = 1_000_000e6;  // 1M USDC cap

function deposit(uint256 amount) external {
    require(totalAssets() + amount <= depositCap, "Cap exceeded");
    // ... deposit logic
}

When to use:

• New vault launch

• Testing phase

• Risk management

• Gradual scaling

3. Utilization Limit

Cap maximum utilization:

uint256 public maxUtilization = 90e18;  // 90%

function borrow(uint256 amount) external {
    uint256 newUtil = (totalBorrowed() + amount) * 100 / totalAssets();
    require(newUtil <= maxUtilization, "Max utilization");
    // ... borrow logic
}

When to use:

• Ensure LP liquidity

• Prevent over-leverage

• Market stress periods

4. Per-Position Limits

Limit individual manager exposure:

uint256 public maxPositionSize = 100_000e6;  // 100k USDC

function borrow(uint256 amount) external {
    require(
        getPosition(msg.sender).borrowed + amount <= maxPositionSize,
        "Position too large"
    );
    // ... borrow logic
}

When to use:

• Diversify risk

• Prevent concentration

• Limit single-point failures

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Implementation

Basic Circuit Breaker

contract FluxVaultWithCircuitBreaker {
    bool public paused;
    uint256 public depositCap;
    uint256 public maxUtilization;

    modifier whenNotPaused() {
        require(!paused, "Paused");
        _;
    }

    function emergencyPause() external onlyOwner {
        paused = true;
        emit EmergencyPause();
    }

    function deposit(uint256 amount)
        external
        whenNotPaused
    {
        require(totalAssets() + amount <= depositCap, "Cap exceeded");
        // ... deposit logic
    }

    function borrow(uint256 amount)
        external
        whenNotPaused
    {
        uint256 util = (totalBorrowed() + amount) * 100 / totalAssets();
        require(util <= maxUtilization, "Utilization too high");
        // ... borrow logic
    }
}

Automated Circuit Breaker

function checkCircuitBreaker() public {
    // Auto-pause if bad debt >10%
    uint256 badDebtRatio = getBadDebt() * 100 / totalAssets();
    if (badDebtRatio > 10 && !paused) {
        emergencyPause();
        emit AutoPause("Bad debt critical");
    }

    // Auto-pause if oracle stale >2 hours
    (, uint256 timestamp) = oracle.getPrice(asset);
    if (block.timestamp - timestamp > 2 hours && !paused) {
        emergencyPause();
        emit AutoPause("Oracle stale");
    }
}

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Monitoring and Triggers

Define Trigger Conditions

enum TriggerReason {
    BAD_DEBT,
    ORACLE_FAILURE,
    MARKET_CRASH,
    EXPLOIT,
    MANUAL
}

event CircuitBreakerTriggered(
    TriggerReason reason,
    uint256 timestamp,
    bytes data
);

function shouldTrigger()
    public
    view
    returns (bool trigger, TriggerReason reason)
{
    // Bad debt >10%
    if (getBadDebt() * 100 / totalAssets() > 10) {
        return (true, TriggerReason.BAD_DEBT);
    }

    // Oracle stale
    if (isOracleStale()) {
        return (true, TriggerReason.ORACLE_FAILURE);
    }

    // Rapid price decline >30%
    if (detectMarketCrash()) {
        return (true, TriggerReason.MARKET_CRASH);
    }

    return (false, TriggerReason.MANUAL);
}

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Recovery Procedures

Resume Checklist

Before unpausing:

• Root cause identified

• Issue resolved

• Testing completed

• Monitoring enhanced

• Community notified

• Audit if needed

Gradual Resume

Don't resume all at once:

// Phase 1: Withdrawals only
function enableWithdrawals() external onlyOwner {
    withdrawalsPaused = false;
}

// Phase 2: Deposits (with low cap)
function enableDeposits(uint256 cap) external onlyOwner {
    depositsPaused = false;
    depositCap = cap;
}

// Phase 3: Borrows (with limits)
function enableBorrows(uint256 maxUtil) external onlyOwner {
    borrowsPaused = false;
    maxUtilization = maxUtil;
}

// Phase 4: Full resume
function fullResume() external onlyOwner {
    depositCap = type(uint256).max;
    maxUtilization = 95e18;
}

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Communication

Trigger Announcement

CIRCUIT BREAKER ACTIVATED

Reason: [Oracle failure detected]
Time: [timestamp]
Impact: [All borrows paused, withdrawals active]
Updates: [Every 30 minutes]
ETA: [Under investigation]

Your funds are safe. More info: [link]

All-Clear Announcement

CIRCUIT BREAKER LIFTED

Duration: [4 hours]
Resolution: [Oracle restored, verified]
Impact: [No losses, all positions safe]
Status: [Full operations resumed]

Thank you for your patience.

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Best Practices

1. Test Regularly

Simulate circuit breaker activation:

• Test pause functionality

• Verify resume procedures

• Check communication channels

• Train team on response

2. Multiple Controls

Layer defenses:

Layer 1: Monitoring & alerts
Layer 2: Automated limits (utilization cap)
Layer 3: Manual pause
Layer 4: Full circuit breaker

3. Clear Governance

Document who can trigger:

• Multisig for manual pause

• Automated for critical thresholds

• Emergency contacts

• Response procedures

4. Transparent

Communicate:

• What triggers exist

• How they work

• Who controls them

• Expected response time

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Related Documentation

• Emergency Procedures

• Vault Risks

• Bad Debt Management