# Kerne Curation Policy, version 2

Dated 6 October 2026. Published at https://kerne.fi/curation/policy-v2.md and summarised at https://kerne.fi/curation. The vault it governs is read live at https://kerne.fi/api/curation.

Version 2 keeps every rule of version 1.1 and moves the vault to a Morpho Vault V2 built to the Morpho app's listing checks. Earlier versions stay published unchanged at https://kerne.fi/curation/policy-v1.1.md and https://kerne.fi/curation/policy-v1.md. A changed rule ships as a new version with its own file and date. This file is not edited after publication.

## 1. What Kerne curates

Kerne is a delta-neutral stablecoin company on Base and an onchain risk curator. This policy covers the second line.

Curation here means deciding what a lending vault may lend against, how much, and when to pull back. Kerne's vault is **Kerne USDC**, a Morpho Vault V2 (ERC-4626) on Base that lends USDC into Morpho Blue markets through one Morpho-approved market adapter.

| | |
|---|---|
| Vault | Kerne USDC (`kerneUSDC`), Morpho Vault V2 |
| Address | `0xc19e2F45Df9de7700d2F1e9CB57a86776e72B50c`, created by the official Morpho VaultV2Factory `0x4501125508079A99ebBebCE205DeC9593C2b5857` |
| Market adapter | `0xa4F45D25B63d122233E9aeE5247F0BFD086c0e54`, from the official MorphoMarketV1AdapterV2Factory `0x9a1B378C43BA535cDB89934230F0D3890c51C0EB`; also the liquidity adapter |
| Adapter registry | Morpho registry `0x5C2531Cbd2cf112Cf687da3Cd536708aDd7DB10a`, set and abdicated: the vault can only ever use Morpho-approved adapters |
| Owner and curator | Kerne governance multisig (Safe) `0x52d3E450bA6c299B1B07298F1E87DD74732D4877` |
| Allocator and sentinel | Kerne allocator key, hardware-secured, `0x14f04cE02f35B29Af564A98544dD7e2393993946` |
| Fees | 0% performance, 0% management |
| Previous vault | MetaMorpho V1.1 `0x62A3380CD1Fbe5f6E313f99Cfdf0a8f449B7Fa99`, retired: caps 0, no supply queue |

## 2. The rules

1. **Blue-chip collateral only.** Collateral must have backing that can be read from chain and a spot market on Base deep enough for a liquidation to clear inside its incentive. The opening set is WETH and cbBTC, both at 86% LLTV.
2. **Market-priced oracles only.** Every oracle must resolve to an executable market price from an independent terminal source. Refused outright: fixed-rate or hardcoded prices, self-attested net asset values, spot prices from pools shallow enough to move for less than the value at stake, and feeds where the issuer is the only source. Every assumption an accepted oracle makes is written down in section 3.
3. **Never our own assets.** kUSD, skUSD and KERNE are excluded as collateral, directly or through a wrapper, from every vault Kerne curates. That includes the kUSD/USDC markets Kerne deployed on Morpho (`0xdc6a28b2941b3d32affc71cdeeb10e9779ff2a8ba1dcabc258e7b61f9a11beb3`) and Euler.
4. **Caps open small and ramp.** A market's supply cap is the lowest of: the opening ramp of 50,000 USDC; 5% of that market's total supply when the cap is set; and what a total loss of the position would cost without ending the vault. A cap steps up only after 30 days without an adverse event (a bad-debt realisation, an oracle deviation beyond its stated assumption, or utilization pinned at 100% for more than 24 hours). Once outside deposits exist, no single collateral market should hold more than half the vault.
5. **Slow up, fast down.** New adapters, cap increases and fee changes wait 3 days onchain. Removing an adapter, abdicating a function and lengthening a timelock wait 7 days. Cap cuts, deallocations and cancellation of a pending change take effect at once.
6. **Disclosure first.** Caps, pending changes, allocations and deposits are read live from Base at https://kerne.fi/api/curation. Kerne capital (the allocator key plus the protective dead-share deposit) is separated from third-party capital by subtraction in every read. A deposit from a Kerne account is disclosed in Kerne's account registry before it is made.
7. **Liquidator coverage is a continuity input, not a solvency signal.** In Kerne's census of all 23,188 Morpho Blue liquidations over 90 days, bad-debt incidence was flat at about a quarter of markets regardless of how many distinct liquidators served them, and rose where there were many. A market served by one or two liquidators gets a lower cap because its clearing depends on a counterparty with no obligation to the vault, not because loss is more likely.
8. **No fee on our own money.** Performance and management fees are 0 while the vault holds only Kerne capital. Any fee change waits 3 days onchain and is announced on https://kerne.fi/curation before it is submitted.

## 3. The opening markets

| Market | Market id | LLTV | Oracle | Market cap | Collateral cap |
|---|---|---|---|---|---|
| WETH / USDC (liquidity market) | `0x8793cf302b8ffd655ab97bd1c695dbd967807e8367a65cb2f4edaf1380ba1bda` | 86% | `0xFEa2D58cEfCb9fcb597723c6bAE66fFE4193aFE4`: Chainlink ETH/USD divided by Chainlink USDC/USD. No wrapper assumption; a USDC depeg moves the price. | 50,000 USDC | 50,000 USDC |
| cbBTC / USDC | `0x9103c3b4e834476c9a62ea009ba2c884ee42e94e6e314a26f04d312434191836` | 86% | `0x663BECd10daE6C4A3Dcd89F1d76c1174199639B9`: Chainlink BTC/USD, no quote feed. Two stated assumptions: Coinbase custody of cbBTC holds, and USDC holds par. | 50,000 USDC | 50,000 USDC |

The adapter as a whole is capped at 100,000 USDC. Relative caps are set to 100% while the vault holds only Kerne capital; rule 4's one-half limit is applied by allocation, and will be set as a relative cap once outside deposits exist. Both markets use the AdaptiveCurve IRM `0x46415998764C29aB2a25CbeA6254146D50D22687`. Deposits enter through the WETH / USDC market and withdrawals leave through it. For these markets the binding limit is the opening ramp, not exit depth: on 5 October 2026 they held about $104M and $1.7B of supply.

## 4. Who can do what

- **Owner and curator (Kerne governance multisig):** the owner assigns roles; the curator adds adapters, raises caps and sets fees and timelocks. Every risk-increasing change waits out its timelock onchain.
- **Allocator (Kerne allocator key, hardware-secured):** moves funds between markets that are already enabled and capped, and sets the liquidity market. It cannot raise a cap, add a market or take funds out of the vault.
- **Sentinel (the same key):** can cancel any pending change, cut caps and deallocate. It cannot add risk.
- **Anyone:** can deposit and withdraw their own funds, execute a change whose timelock has passed, and force a deallocation from a market when they need liquidity. The vault is non-custodial: no role can withdraw a depositor's funds.

The adapter registry and the share and asset gates are abdicated: no one, Kerne included, can switch the vault to an unapproved adapter or put a gate on who may hold or receive shares.

## 5. Key management

- The governance multisig is a Safe whose signers each hold hardware wallets. Its address and every transaction it has executed are public.
- The allocator key is a hardware wallet. It never holds third-party funds and has no power to add risk; its worst case is a poor allocation between two capped, approved markets, which the multisig can reverse and any depositor can exit.
- No role key lives on a server.

## 6. What this policy does not have yet

- An automated allocator or a round-the-clock monitoring desk. Allocations are deliberate signed decisions.
- A calibrated cap model, a stress harness or a realised-margin model. The caps are a ramp, which is why they are small.
- A listing in the Morpho app. The vault is built to the published listing checks; listing is Morpho's decision.

## 7. Relationship to kUSD

kUSD is Kerne's dollar on Base, backed one for one by USDC. The curation line and kUSD share a method (publish the rules and the live numbers, separate Kerne's own money from everyone else's) and nothing else: the vault does not hold kUSD, does not lend against it, and is not part of kUSD's reserves.