A Risk Assessment for the Neutrino USD-N Project
A few days ago, some guys from the German Waves community on Telegram performed a risk assessment of the Neutrino USD-N project. The Neutrino USD-N project is a stable coin pegged to the value of the US Dollar. The new and interesting aspect about it is that it is implemented as an algorithmic stable coin that uses the Waves token as a collateral.
In order to perform the risk assessment, the group (consisting of 7 members) used the RiskRide app. In the first step, each of the 7 members added their risks to the project. Here, 11 risks have been identified, from which all 11 have also been consolidated in the list of risks that needed to be evaluated. Namely, those eleven risks are the following:
- Regulatory problems: Any legal issues regarding minting, distributing and trading USDN or related products.
- Documentation: Users do not understand Neutrino and its components due to a lack of documentation.
- declining value =< 0.10: Waves massively loses value =< 0.10 $ / Waves.
- declining value =< 0.50: Waves massively loses value =< 0.50 $ / Waves.
- Lose peg: Neutrino is not able to keep its value at $1
- Competitors: A very similar project appears on another blockchain.
- Flaw in Waves Platform Protocol: A flaw in the Waves Platform Protocol which undermines the SC code.
- No buyers for Bonds: For whatever reason there are no more buyers for USD-NB.
- Marketing: There is not enough marketing around Neutrino so that it does not get big.
- End of Service: The coin is discontinued.
- Flaw in Neutrino Smart Contract: A flaw in the Neutrino SC which gives attacker access to the locked up Waves.
This list includes a nice mix of risks, ranging from technical risks (e.g., flaws in the Neutrino contract or the underlying Waves platform), economical risks (e.g., that the collateral loses value or that the algorithm is not able to keep the peg at one Dollar), marketing risks (simply that there is not enough marketing done around this topic so that the technology is not able to get traction) to the risk of competitors from other blockchain platforms.
After the successful consolidation of the risks, each member of the group was asked to evaluate all risks based on his personal perspective towards the project. This evaluation was done in two directions, first every member had to assign a value for the likelihood (in percentage) for every risk to happen and second to evaluate the impact (on a scale from 1–5) of the risk to the project, if it actually happens. The result of this evaluation is shown in Figure 1:
Here, we can clearly see that according to the members of this group, the most pressing risks are the following five ones:
- Regulatory problems
- Lose peg
- Flaw in Waves Platform Protocol
- Marketing
- Flaw in Neutrino Smart Contract
Therefore, a recommendation to the Neutrino development team would be to establish mitigation strategies in order to handle those risks: either reduce their likelihood or their impact on the project.
Sake to the transparency of the blockchain, everybody is able to see the corresponding transactions on the projects’ Waves address and to check the results in the RiskRide app under the following project address: 3P4YQo3p7sPdjL81Yu46PjQhxJMy2Tx1xJw.
This risk assessment might act as a good example on how risk assessment can easily be performed by (community) members of a certain project.
I would like to take this opportunity and thank the members of the group for participating in this effort: @Heinrich2020, @eddwood76, @Heinrich, @EinsZwo, @Bernhard1993 and @stakinglab.