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DeFi Pulse has developed a risk assessment system for DeFi projects
DeFi Pulse Launches DeFi Protocols Risk Rating System.
Aave and Compound received high marks.
Not all members of the crypto community were impressed by the new development.
DeFi analytic service Decentralized finance (DeFi) – this is financial services, technology-based blockchain, which offer users access towards an open, efficient and … More Pulse has developed a rating system to assess the degree of risks inherent in various DeFi projects.
The boom in the decentralized finance (DeFi) segment in 2020 came with a lot of risks for investors. In this red-hot new industry, big money was not only made, but wasted. The reason for this was a variety of pumping schemes, manipulations and commonplace technical vulnerabilities..
The experts of the analytical service DeFi Pulse drew attention to this trend and tried to develop an effective system for assessing the degree of risks inherent in various platforms. The work was carried out in conjunction with the Gauntlet Network, a modeling and simulation platform for DeFi and blockchain protocols..
As a result, the Economic Safety Grade security assessment system was created, allowing users to analyze and compare the risks they may face in various protocols on the blockchain..
1 / Introducing the DeFi Pulse Economic Safety Grade
Created in partnership with the fine folks at @gauntletnetwork, economic safety grades allow users to more easily quantify and compare the risks they face using on-chain protocols. pic.twitter.com/9Iaw8xrOF0
– DeFi Pulse (@defipulse) October 13, 2020
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DeFi Risk Simulation
Experts believe that many DeFi protocols are overly complex for inexperienced users. Accordingly, this does not allow them to adequately recognize and identify possible risks of a particular platform..
The new system, powered by the Gauntlet Network, will use data from centralized and decentralized (DEX) exchanges and combine it with user data on the blockchain. This will allow it to model and assess the level of market risks of a particular protocol and assess its “economic security” for an investor on a scale from 1 to 100.
The popular Aave and Compound tokens were chosen as test coins. Experts analyzed historical statistics on their liquidity and volatility, on the basis of which the coins were highly valued – 95% for Aave and 91% for Compound..
For interested investors, Gauntlet representatives offered detailed information on the calculation and interpretation of risks:
Economic security rating. Source: Gauntlet.Network
Forward to the beta system
However, the developers of the rating warned that it does not take into account the risks of smart contracts. The best form of assessing such risks remains audit and formal verification tools, they added..
However, analysts do not intend to stop at an alpha release. They promise that the next beta will introduce an improved rating system that takes into account a wider range of factors..
In general, DeFi Pulse hopes that such developments, bringing awareness and security to the still immature DeFi industry, will increase its stability, strengthen investor confidence and, accordingly, support its further growth and development. In the meantime, users will be able to make safer decisions in a healthier ecosystem..
However, Chris Black, founder of another analytical resource, DeFi Watch, was not impressed by the news. He called the new rating “yet another attempt” to assess the risks of DeFi by comparing projects with each other. Meanwhile, he believes, a true rating system should be developed by comparing each DeFi project with the risks of investing in bitcoin (BTC).
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