Protocol Overview

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Learning Path

graph LR
    style A fill:#2ecc71,stroke:#27ae60,color:white
    style B fill:#3498db,stroke:#2980b9,color:white
    style C fill:#3498db,stroke:#2980b9,color:white
    style D fill:#3498db,stroke:#2980b9,color:white
    style E fill:#3498db,stroke:#2980b9,color:white
    
    A[Protocol Overview] --> B[Core Components]
    B --> C[Risk Management]
    C --> D[Market Infrastructure]
    D --> E[Integration Guide]

Table of Contents

• Protocol Overview
• Core Protocol
• Risk Management
• Market Infrastructure
• Integration Points
• Protocol Architecture
  • Visual Guide
• Key Components
  • Token System
  • Risk Management
  • Market Mechanisms
• System Design
  • Risk Flow
  • Network Topology

Protocol Architecture

The Riskify Protocol is built on a modular architecture that separates concerns into three main subsystems: Core Protocol, Risk Management, and Market Infrastructure.

Visual Architecture Guide

graph TB
    
    %% Core Protocol
    subgraph Core["Core Protocol"]
        PSCT["Property Specific<br/>Catastrophe Tokens"]
        BT["Building Tokens"]
        RP["Risk Pools"]
    end

    %% Risk Management
    subgraph Risk["Risk Management"]
        RM["Risk Models"]
        GNN["GNN Price Oracle"]
        VM["Vault Management"]
    end

    %% Market Infrastructure
    subgraph Market["Market Infrastructure"]
        AMM["Risk AMM"]
        PM["Portfolio Manager"]
        BM["Bundle Manager"]
    end

    %% Relationships
    PSCT --> RP
    BT --> PSCT
    RP --> Risk
    Risk --> Market
    Market --> RP

    %% Apply styles
    class Core core
    class Risk risk
    class Market market

Architecture Explanation:

• Core Protocol: The foundation of the system, consisting of tokens that represent real-world risk and pools that aggregate and manage these risks.
• Risk Management: Handles the calculation, validation, and monitoring of risk metrics using advanced models and oracles.
• Market Infrastructure: Facilitates trading, portfolio management, and risk transfer between different pools and participants.

Key Components

1. Token System

The token system is the foundation of the Riskify Protocol, creating a standardized way to represent and transfer risk.

graph LR
    
    %% Nodes
    BT["Building Token<br/>(ERC-721)"]
    PSCT["PSCT<br/>(ERC-20)"]
    SP["Structured Pool"]
    CP["Cross Pool"]
    PP["Passive Pool"]
    
    %% Relationships
    BT --> PSCT
    PSCT --> SP
    PSCT --> CP
    PSCT --> PP
    
    %% Apply styles
    class BT,PSCT token
    class SP,CP,PP pool

Token System Explanation:

• Building Tokens (ERC-721): Represent physical properties and their characteristics, serving as the source of risk data.
• Property Specific Catastrophe Tokens (ERC-20): Standardized tokens that represent specific types of risk (e.g., hurricane, earthquake) for a building.
• Pool Types: Different risk pools that accept PSCTs based on their risk profile and management strategy:
  • Structured Pools: Organize risk into tranches with different risk/reward profiles
  • Cross Pools: Enable risk transfer across different geographic regions or risk types
  • Passive Pools: Provide simplified access to risk exposure with automated management

2. Risk Management

The risk management system provides a comprehensive framework for assessing, propagating, and monitoring risk throughout the protocol.

graph TB
    
    %% Risk Assessment
    subgraph RiskAssessment["Risk Assessment"]
        BR["Base Risk"]
        TR["Temporal Risk"]
        NR["Network Risk"]
        SR["Systemic Risk"]
    end
    
    %% Risk Propagation
    subgraph RiskPropagation["Risk Propagation"]
        DP["Direct Propagation"]
        BP["Bundle Propagation"]
        CP["Cross-Chain Propagation"]
    end

    %% Relationships
    BR --> TR
    TR --> NR
    NR --> SR
    RiskAssessment --> RiskPropagation
    
    %% Apply styles
    class RiskAssessment assessment
    class RiskPropagation propagation

Risk Management Explanation:

• Risk Assessment: A hierarchical approach to risk calculation:
  • Base Risk: Fundamental risk metrics for individual properties or events
  • Temporal Risk: Time-dependent factors that affect risk (seasonality, climate change)
  • Network Risk: Interconnected risk factors between different properties or regions
  • Systemic Risk: Broader market or environmental factors that affect multiple risks simultaneously
• Risk Propagation: Methods for transferring and managing risk:
  • Direct Propagation: Simple one-to-one risk transfer
  • Bundle Propagation: Grouping multiple risks for efficient transfer
  • Cross-Chain Propagation: Transferring risk across different blockchain networks

3. Market Mechanisms

Market mechanisms enable efficient pricing, trading, and management of risk tokens.

graph LR
    
    %% Pricing Components
    subgraph Pricing["Pricing Components"]
        PPO["PPO-based AMM"]
        GNN["GNN Oracle"]
        RV["Risk Validation"]
    end

    %% Trading Components
    subgraph Trading["Trading Components"]
        LP["Liquidity Pools"]
        PM["Portfolio Management"]
        BM["Bundle Management"]
    end

    %% Relationships
    Pricing --> Trading
    
    %% Apply styles
    class Pricing pricing
    class Trading trading

Market Mechanisms Explanation:

• Pricing Components:
  • PPO-based AMM: Automated Market Maker using Proximal Policy Optimization for dynamic pricing
  • GNN Oracle: Graph Neural Network that provides price feeds based on network analysis
  • Risk Validation: Verification of risk metrics before pricing
• Trading Components:
  • Liquidity Pools: Provide trading venues for risk tokens
  • Portfolio Management: Tools for managing risk exposure across multiple positions
  • Bundle Management: Creation and management of risk bundles for efficient transfer

System Design

Risk Flow Architecture

The risk flow architecture illustrates how risk moves through the system from creation to settlement.

sequenceDiagram
    participant BT as Building Token
    participant PSCT as PSCT
    participant Pool as Risk Pool
    participant Oracle as GNN Oracle
    participant Market as AMM

    Note over BT,Market: Risk Flow Process
    
    BT->>PSCT: Mint Tokens
    PSCT->>Pool: Deposit Risk
    Pool->>Oracle: Request Pricing
    Oracle-->>Pool: Return Risk Metrics
    Pool->>Market: List Position
    Market->>Pool: Match Orders
    
    Note over Pool,Market: Risk Transfer Complete

Risk Flow Explanation:

1. Building Token Creation: Properties are registered in the system as Building Tokens
2. PSCT Minting: Property Specific Catastrophe Tokens are created based on building characteristics
3. Risk Deposit: PSCTs are deposited into appropriate risk pools
4. Pricing Request: Pools request pricing information from the GNN Oracle
5. Risk Metrics: Oracle returns comprehensive risk metrics for pricing
6. Position Listing: Pools list positions on the AMM for trading
7. Order Matching: Buyers and sellers are matched through the AMM

Network Topology

The network topology shows how the Riskify Protocol operates across multiple blockchain networks.

graph TB
    
    %% Layer 1 Networks
    subgraph L1["Layer 1 Networks"]
        ETH["Ethereum"]
        BSC["BSC"]
        AVAX["Avalanche"]
    end

    %% Layer 2 Networks
    subgraph L2["Layer 2 Networks"]
        ARB["Arbitrum"]
        OP["Optimism"]
        POLY["Polygon"]
    end

    %% Relationships
    ETH --> ARB
    ETH --> OP
    BSC --> POLY
    AVAX --> POLY
    
    %% Apply styles
    class L1 l1
    class L2 l2

Network Topology Explanation:

• Layer 1 Networks: Primary blockchain networks where core protocol components are deployed:
  • Ethereum: Main network for high-value transactions and governance
  • BSC: Binance Smart Chain for lower-cost transactions in Asia
  • Avalanche: Fast finality network for time-sensitive operations
• Layer 2 Networks: Scaling solutions that extend the capabilities of Layer 1:
  • Arbitrum & Optimism: Ethereum scaling solutions for lower gas costs
  • Polygon: Multi-chain scaling solution connecting to multiple Layer 1 networks

Next Steps

For More information on Riskify's Architecture

• Architecture Details→
• Asset Tokenization →

Continue Your Journey

• Getting Started Guide →
• Technical Reference →
• Integration Guide→