Security Model

Security Architecture Overview

Aqua's security model is designed around the hybrid architecture principle, where security responsibilities are distributed between off-chain and on-chain components. The model ensures that while off-chain components provide performance and flexibility, on-chain components maintain trustlessness and security guarantees.

Trust Boundaries

Off-Chain Trust Requirements

Limited Trust Scope Users must trust the off-chain backend for quote aggregation and price discovery, but this trust is bounded by cryptographic verification mechanisms.

Trust Limitations:

• Backend cannot execute trades without valid signatures

• Backend cannot modify quote data after signing

• Backend cannot access user funds or tokens

• Backend downtime does not affect existing on-chain assets

Trust Verification:

• All quotes are cryptographically signed using EIP-712

• Signature verification prevents quote manipulation

• Time-bounded quotes limit exposure to stale data

• Multiple backend implementations possible for redundancy

On-Chain Trustless Guarantees

Cryptographic Security All critical operations are verified on-chain using mathematical proofs rather than trust assumptions.

Trustless Properties:

• Quote authenticity verified through EIP-712 signatures

• Registry operations governed by role-based access controls

• Trade execution enforced by smart contract logic

• Asset custody remains with users throughout the process

EIP-712 Signature Security

Quote Integrity Protection

Signature Generation Process The off-chain backend generates structured signatures that bind specific quote parameters to prevent tampering.

Protected Quote Elements:

• Token symbol and amount

• Price and expiration timestamp

• Issuer identity and nonce

• User address and trade direction

Signature Verification On-chain verification ensures that quotes haven't been modified between generation and execution.

Security Properties:

• Non-repudiation: Backend cannot deny signing valid quotes

• Integrity: Any modification of quote data invalidates the signature

• Authenticity: Only authorized backend can generate valid signatures

• Replay protection: Nonce system prevents quote reuse

Key Management Security

Backend Key Security The off-chain backend's signing keys are the critical security component for quote generation.

Key Protection Measures:

• Hardware Security Module (HSM) integration for key storage

• Multi-signature schemes for key backup and recovery

• Regular key rotation procedures

• Segregated key access controls

Operational Security:

• Keys never exposed in application memory

• Signing operations performed in secure enclaves

• Comprehensive audit logging of all signing operations

• Emergency key revocation procedures

Registry Security Model

Token Registry Protection

Registration Authority Only authorized issuers can register tokens, preventing unauthorized or malicious token listings.

Access Control Mechanisms:

• Role-based permissions for token registration

• Multi-signature requirements for critical operations

• Time-locked administrative changes

• Emergency pause mechanisms

Registry Integrity:

• Immutable token-to-issuer mappings once established

• Transparent on-chain record of all registrations

• Community-verifiable registry state

• Protection against registry poisoning attacks

Executor Registry Security

System-Level Controls Executor registration is restricted to system administrators to maintain security standards.

Security Validations:

• Code review requirements for new executors

• Formal verification of executor logic where possible

• Compatibility testing with issuer protocols

• Security audit requirements for complex executors

Executor Isolation:

• Each executor handles only its designated issuer

• Failure isolation prevents cascading security issues

• Upgradeable executor implementations for security patches

• Emergency executor disabling capabilities

Smart Contract Security

Manager Contract Protection

Entry Point Security As the primary entry point, the Manager Contract implements multiple security layers.

Security Mechanisms:

• Signature verification before any trade processing

• Quote expiration checks to prevent stale price exploitation

• Registry validation to ensure legitimate trading pairs

• Reentrancy protection for all external calls

Access Controls:

• Only verified quotes can trigger trade execution

• Registry modifications require appropriate permissions

• Emergency pause functionality for critical situations

• Upgradeable contract design with timelock governance

Executor Contract Security

Isolation Principle Each executor contract operates independently, limiting the blast radius of potential vulnerabilities.

Security Design:

• Minimal trust assumptions about issuer protocols

• Input validation for all trade parameters

• Safe external call patterns to prevent reentrancy

• Comprehensive error handling and failure recovery

Integration Security:

• Standardized interface reduces integration risks

• Whitelisting of authorized token contracts

• Protection against malicious issuer behavior

• Circuit breakers for unusual trading patterns

Economic Security

Quote Manipulation Protection

Time-Bounded Quotes Short quote expiration times limit the window for potential manipulation attacks.

Economic Incentives:

• Backend reputation tied to quote quality and reliability

• Economic penalties for providing poor quotes

• Market-driven selection of optimal pricing

• Transparency in quote generation process

MEV (Maximal Extractable Value) Considerations

Front-Running Protection The quote-based model provides some protection against traditional MEV attacks.

MEV Mitigation:

• Pre-signed quotes reduce on-chain price discovery

• Time-bounded execution windows limit sandwich attacks

• Batch execution capabilities for multiple trades

• Integration with MEV protection services where appropriate

Operational Security

Infrastructure Security

Backend Infrastructure Comprehensive security measures protect the off-chain infrastructure.

Security Measures:

• Multi-region deployment for availability

• DDoS protection and rate limiting

• Encrypted communication with all external services

• Regular security audits and penetration testing

Monitoring and Alerting:

• Real-time monitoring of all system components

• Automated alerting for suspicious activities

• Comprehensive logging for security analysis

• Incident response procedures and escalation paths

Upgrade Security

Safe Upgrade Procedures Both off-chain and on-chain components support secure upgrade mechanisms.

Upgrade Controls:

• Timelock governance for contract upgrades

• Multi-signature requirements for critical changes

• Gradual rollout procedures for backend updates

• Rollback capabilities for emergency situations

Risk Management

Systemic Risk Mitigation

Component Isolation Failure in one component should not compromise the entire system.

Risk Controls:

• Independent operation of each issuer integration

• Circuit breakers for unusual market conditions

• Position limits and exposure controls

• Emergency shutdown procedures

Compliance and Regulatory Considerations

Regulatory Alignment Security model designed to support compliance with evolving regulatory requirements.

Compliance Features:

• Comprehensive audit trails for all transactions

• Identity verification integration capabilities

• Transaction monitoring and reporting tools

• Jurisdiction-specific compliance modules

Security Monitoring

Real-Time Threat Detection

Automated Monitoring Continuous monitoring of system behavior to detect potential security threats.

Detection Capabilities:

• Unusual trading pattern identification

• Quote manipulation detection

• System performance anomaly alerts

• Integration with threat intelligence feeds

Incident Response

Response Procedures Comprehensive incident response plan for various security scenarios.

Response Capabilities:

• Rapid threat containment procedures

• Emergency system shutdown mechanisms

• Coordinated response with affected issuers

• Post-incident analysis and improvement processes

Security Assumptions

Explicit Trust Requirements

Off-Chain Dependencies Clear definition of what users must trust in the system.

Trust Assumptions:

• Backend operators act in good faith for quote generation

• Infrastructure providers maintain system availability

• Key management systems remain secure

• Regulatory environment remains stable

Security Guarantees

Cryptographic Guarantees Mathematical certainties provided by the security model.

Guaranteed Properties:

• Quote authenticity through signature verification

• Trade atomicity through smart contract execution

• Registry integrity through on-chain storage

• User asset custody through non-custodial design

This security model provides a robust foundation for tokenized asset trading while maintaining the flexibility and performance benefits of the hybrid architecture approach.