DeFi Pulse, the decentralized finance (DeFi) analytics platform and the digital asset modeling platform Gauntlet have released a new tool to improve users’ risk awareness of major DeFi projects.
It has been reported that the rating system is still in development and does not factor in all risks, such as smart contract risks.
However, the grading tool looks at key factors including user behavior, collateral volatility, relative collateral liquidity, protocol parameters, and smart contract risk. Each project is then given a risk profile ranking them between 1 and 100.
The report said that decentralized lending protocols Aave and Compound are the first projects to be reviewed in the new Economic Safety Grade scheme, receiving scores of 95% and 91% respectively, as MakerDAO is the next protocol scheduled to receive the assessment.
DeFi Pulse stated:
“In this initial alpha, these grades are formed by analyzing the historical liquidity and volatility data to find the collateral most likely to cause issues.”
The team added:
“The risk of the system for users borrowing stablecoins against this collateral is estimated and normalized to create the 1 to 100 grade you see on DeFi Pulse.”
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
Likewise, Gauntlet noted that the assessment tool does not aim to model smart contract risks asserting that “auditors and formal verification tools are best suited for assessing this form of risk.”
Decentralized finance (DeFi) analytics platform #DeFi Pulse has launched new safety ratings in alpha to enable users to compare the risks. However, the ratings system is still in development and does not factor in all risks, such as smart contract risks. https://t.co/zd07IY2eu5 — Crypto Emporium (@CryptoEmporium_) October 14, 2020
Gauntlet highlighted that its safety assessment metric is still in the early stages, emphasizing that there are many potential risks associated with lending protocols not currently incorporated within its scoring system.
It said:
“An astute observer might have noticed we omit the case where the protocol is illiquid. We hope to model this as well as a few other things as we build towards a beta release.”
Thus, Gauntlet’s system seeks to “determine the chance of insolvency in audited on-chain lending protocols.”
Source: Cointelegraph