Risk tier classification (Lower Risk vs Higher Risk)
Below is a rough qualitative classification used to get a clearer picture of which fleet (Lower Risk vs Higher Risk) an ARK belongs to and how conservative caps, rebalance limits, and monitoring are to be set.
Higher Risk (any of the following flags):
- Leverage or looping to earn yield (borrow to supply, recursive leverage, delta-neutral leverage, etc.).
- Cross-chain exposure (bridges, multi-chain allocators).
- Non-instant liquidity where exit depends on unwinding, cooldowns, redemption queues, or processes that can take days.
- Token swaps required before deposit into the yield source (DEX routing introduces slippage risk).
- Backing quality: more than 30% of backing is not bluechip collateral, or backing includes long-tail, hard-to-verify collateral.
- Strategy aggregation: vaults/strategies that can rotate across many downstream protocols and positions, making full collateral exposure dynamic.
- Custom oracles
Lower Risk (typical profile)
Single-chain, non-leveraged, no mandatory pre-deposit swaps, predictable and near-instant exits, transparent backing dominated by low-risk collateral, minimal operational risks, and minimal dependency surface beyond the target protocol.
We note that beyond exposure to less conservative collateral assets on average, as assessed by the BA under its risk framework, the main distinction in how the BA treats “Higher Risk” vaults from “Lower Risk” vaults lies in the application of more aggressive risk parameters (e.g., higher caps, higher maximum % of TVL to onboarded ARKs, etc.) to “Higher Risk” vaults.
In general, this means LR fleets are not necessarily limited to only blue-chip collateral per se, but also to low-to-mid-risk collateral although with conservative caps, thus limiting the exposure on the fleet level. In contrast, HR fleets are intended to accommodate higher-risk collateral and are configured with generally less conservative parameters.