> For the complete documentation index, see [llms.txt](https://delpho.gitbook.io/delpho-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://delpho.gitbook.io/delpho-docs/how-delpho-works/stability-mechanisms.md).

# Stability mechanisms

Delpho is built around the assumption that the protocol's response to stress should be specific, named, and observable. The mechanisms on this page exist to make that response predictable.

The V1 stability mechanisms are **caps**, the **treasury reserve**, **pause functions**, **circuit breakers**, and **auto-deleverage**. Two further controls (**hedge inversion** and a **yield-distribution pause**) are planned for future releases.

## Caps

| Cap                     | Purpose                                                                                                                                              |
| ----------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- |
| Per-collateral debt cap | Limits the maximum USDV that can be minted against a given collateral type. Capacity grows as the collateral type matures and reserve sizing scales. |
| Total supply cap        | Limits the total USDV in circulation. Set conservatively at launch and revised upward as the protocol scales.                                        |
| Per-position cap        | Limits the maximum debt size for a single position. Prevents oversized concentrations.                                                               |

Current cap values are listed on the [Parameters](/delpho-docs/parameters.md) page and date-stamped.

## Treasury Reserve

The treasury reserve is the protocol's primary stability buffer. It is a protocol-owned smart-contract balance targeting roughly **5% of TVL**, funded by retaining a portion of positive-funding inflow during normal periods.

The reserve plays three roles:

* **Liquidation backstop.** Absorbs positions liquidated at their collateral's liquidation threshold (80% for HYPE/kHYPE, 90% for USDC/USDT). See [Liquidations](/delpho-docs/how-delpho-works/liquidations.md).
* **Redemption source.** First source of HYPE paid out for USDV redemptions. See [Redemptions and the peg](/delpho-docs/how-delpho-works/redemptions-and-the-peg.md).
* **Funding buffer.** Absorbs short-term gaps when funding flips negative, holding sUSDV per-share value steady until conditions normalize. See [sUSDV mechanics](/delpho-docs/how-delpho-works/susdv-mechanics.md).

The reserve is held as staked sUSDV, so the reserve itself accrues funding-capture yield. Reserve health relative to TVL is monitored continuously.

See [Parameters](/delpho-docs/parameters.md) for the current reserve target.

## Pause functions

Several operations can be paused independently when stress is detected:

* **Mint pause:** stops new USDV from being created.
* **Redeem pause:** stops redemption flow temporarily.

The intent of a pause is not to make the protocol immune to stress. It is to make the protocol's response to stress predictable. Pause authority is held by a multisig with documented timelock behavior. 

## Circuit breakers

Circuit breakers are at multiple levels of the system. If a parameter (peg deviation, position size relative to reserves, borrow rate vs expected envelope) moves outside its expected range, defined operations pause while the underlying state is examined. The triggers and thresholds are intended to be observable rather than hidden.

\[PENDING: publish specific circuit breaker thresholds in the [Parameters](/delpho-docs/parameters.md) page before launch.]

## Auto-deleverage

Delpho's auto-deleverage is an opt-in protection on borrow positions. When a user's LTV approaches the liquidation threshold, the protocol automatically unstakes the user's sUSDV and repays USDV to bring the position back. It sits one step ahead of liquidation, and is the primary user protection in volatile markets.

See [*Liquidations*](/delpho-docs/how-delpho-works/liquidations.md) for the full description.

## Planned controls (future releases)

Two stability controls are planned for future releases beyond V1:

* **Hedge inversion.** Flips the perp leg from short to long when negative funding looks persistent rather than transient, so the protocol continues capturing the spread.
* **Yield distribution pause.** Stops sUSDV from accruing during sustained negative funding, holding per-share value flat rather than letting it accrue negatively.