Gauntlet to Provide Automated Financial Risk Management for Acala and Karura
Gauntlet will contribute to optimizing solvency and capital efficiency for DeFi on Polkadot and Kusama
Acala and Karura have entered into a strategic partnership with Gauntlet. Gearing up for Acala’s Kusama-based launch of Karura, Gauntlet will build a financial model for Karura with a focus on market risks like solvency and capital efficiency. This model will also be refined and extended for Acala on the Polkadot at launch.
Gauntlet is a simulation platform for on-chain risk management. Gauntlet has performed market risk assessments for Compound, MakerDAO, Liquity, Notional, and soon to be released Aave, and more. They are active participants in numerous communities and governance processes — including Uniswap and Compound where they are top delegates. Gauntlet’s risk scores can be found on DeFi Pulse where they provide Economic Safety Grades for lending protocols. Most recently, Gauntlet has partnered with Balancer to dynamically set pool trading fees to maximize the returns of liquidity providers.
As a sister-chain to Acala — the DeFi hub of the Polkadot ecosystem — Karura aims to achieve the same goal within the Kusama ecosystem. Kusama is known as Polkadot’s faster, wilder cousin — a multi-chain network that’s built almost identical, but operates as an independent, stand-alone network with faster governance parameters and a higher risk tolerance. As a scalable, EVM-compatible network optimized to power DeFi applications, Karura allows the Acala Foundation and independent developers to push the limits of what’s possible, serving as an environment to launch bold new financial innovations. Karura serves the DeFi demand of the Kusama community, while Acala is being built to serve the DeFi demand of the Polkadot community. Both will operate in parallel, and will be interoperable once the Polkadot-to-Kusama bridge is live.
By leveraging Kusama’s plug-and-play security, high-capacity processing speed, micro-gas fees, and interoperability across networks, Karura will provide a broad suite of financial applications including trustless staking derivatives products (liquid KSM), a multi-collateralized stablecoin backed by cross-chain assets (kUSD), and a decentralized exchange using the AMM liquidity model and an Ethereum mainnet bridge.
Acala recently announced they had won the first parachain slot auction on Polkadot testnet Rococo. Ahead of Acala’s launch on Polkadot, Karura is preparing to deliver decentralized financial products and stable assets on Kusama. Building on Gauntlet’s simulation platform and core models for DeFi primitives on Ethereum, we will propose optimal risk parameters for Acala and Karura.
To help Acala and Karura launch, Gauntlet will initially model market risk for the collateral-backed stablecoins kUSD and aUSD. Key components include providing collateral, borrowing and repaying, and liquidations.
At a later stage Gauntlet will investigate modeling stablecoin stability, token rewards, liquid staking, and fees to make Acala and Karura more robust. Acala and Karura are striving to be all-in-one DeFi platforms. Gauntlet’s simulation platform plans to be along for the ride.
Gauntlet is a simulation platform for on-chain risk management. Gauntlet uses battle-tested techniques from the algorithmic trading industry to help protocols manage risk, fees, capital efficiency, and rewards. Our risk scoring and agent-based simulation models optimize parameter decisions for tens of billions of dollars in DeFi TVL.
Acala is the all-in-one DeFi hub of Polkadot. Acala is an Ethereum-compatible platform for financial applications to use smart contracts or built-in protocols with out-of-the-box cross-chain capabilities and robust security. The platform also offers a suite of financial applications including: a trustless staking derivative (liquid DOT), a multi-collateralized stablecoin backed by cross-chain assets (aUSD), and an AMM DEX — all with micro gas fees that can be paid in any token.
Karura is the all-in-one DeFi hub of Kusama. Founded by the Acala Foundation, Karura is a scalable, EVM-compatible network optimized for DeFi. The platform offers a suite of financial applications including: a trustless staking derivative (liquid KSM), a multi-collateralized stablecoin backed by cross-chain assets (kUSD), and an AMM DEX — all with micro gas fees that can be paid in any token.