Security

Dual-Layer Custodianship for RWAs

A key challenge in tokenising RWAs is ensuring the security of the physical assets they represent. Exotic Vaults leverages a dual-layer custodianship approach:

• Trusted Custodians: Physical assets are stored with physical custodians. These custodians are regularly audited by actors within the Exotic Vaults ecosystem. We expect that negative audits will deter investment into Vaults made up of assets stored with untrustworthy custodians.

• On-Chain Validation: Each RWA or RWA fraction is tied to an ERC‑721 token on Avalanche C‑Chain (EVM), representing its ownership and metadata. Independent auditors validate the authenticity of these tokens, ensuring the asset's linkage is tamper-proof.

Immutable Ownership Records

The protocol uses blockchain immutability to create an unalterable record of ownership for every tokenised RWA. This eliminates disputes over provenance and ensures transparency in ownership history, a crucial factor for high-value assets.

Transparent Auditor Incentives

To prevent manipulation or bias, auditors are compensated through a transparent reputation system. Audits are cross-verified, and audit outcomes are publicly visible on the blockchain. Misconduct by verified auditors leads to immediate penalties and exclusion from the ecosystem.

Anti-Centralisation Measures

While governance rests with $XVAULT holders, safeguards ensure that no single entity or whale can dominate decision-making:

• Quadratic Voting: Reduces the influence of large token holders, balancing power among participants.

• Progressive Limits: Limits are set on votes affecting sensitive elements, such as fees or token rewards, to protect the ecosystem.

Core contracts are immutable or DAO‑upgradable via on‑chain vote and time‑lock; there is no unilateral freeze or “god mode.” Protocol parameter changes (e.g., fee switches) require DAO approval + time‑lock. Developer compensation is via annual DAO grants (no automatic revenue right)

Incident Response and Redundancy

Given the critical nature of the assets traded, Exotic Vaults employs a comprehensive disaster recovery plan. This includes multi-sig wallets for critical actions, decentralised backups for asset metadata, and active monitoring for unusual behaviour on the DEX.