Meet the ITB DeFi Risk Radar: The One Platform to Monitoring Economic Risk in DeFi

Dozens of protocols with hundreds of actionable risk signals.

Risk management should be a fundamental element in the next phase of decentralized finance (DeFi). As central banks cut rates and the crypto market recovers from the turmoil of the last 18 months, DeFi is well-positioned to enable some of the core financial services for the next generation of digital asset solutions. However, DeFi remains risky, and large institutions require proper risk management models to adopt DeFi at scale. Today, we unveil the first version of the IntoTheBlock (ITB) Risk Radar to monitor real-time economic risk in DeFi protocols. This platform allows any institution interacting with DeFi protocols to have real-time visibility into potential risk conditions and take actions accordingly.

The History: Over the past two years, ITB has collaborated with some of the largest institutions in crypto, deploying and protecting capital at scale in DeFi protocols. As part of our institutional DeFi platform, we have built hundreds of models for modeling economic risk in and across DeFi protocols. Following the increasing DeFi risk over the last few months, several large institutions approached us, expressing interest in accessing the risk management models used in our platform. After some consideration, we realized that risk management needs to be a core building block to unlock the full potential of DeFi, and perhaps we can contribute to that vision with the large number of models we have built to protect capital in DeFi at scale.

The first step was to validate the idea with dozens of DeFi protocols we work with. To our surprise, many of the largest DeFi protocols decided to partner with us in this endeavor. As a result, we worked with over 25 of the most established and most promising DeFi protocols in the market to build and validate real-time quantitative models that assess economic risk conditions in those protocols. This was the genesis of the platform we are unveiling today.

Economic Risk in DeFi

Risk in DeFi doesn’t have a single dimension. Most associate risk with hacks or exploits in DeFi protocols. While these events certainly grab headlines and result in binary losses, they are not the main dimension of losses for DeFi investors. Economic risks, such as liquidations, slippage, depegging scenarios, impermanent loss, and many others, are responsible for hundreds of millions of losses in DeFi protocols every year. These events represent the core of any risk management model for institutions adopting DeFi and are often overlooked since they are incredibly challenging to model and monitor.

Enter ITB DeFi Risk Radar

In a nutshell, ITB’s DeFi Risk Radar is a platform for monitoring economic risk in DeFi protocols. The platform includes key building blocks for managing economic risk in DeFi protocols:

• Risk dashboards with quantitative risk signals for individual DeFi protocols and markets.
• Programmable APIs to monitor and query risk signals in DeFi protocols.

For instance, by looking at a pool in an AMM protocol like Curve, you can find useful signals such as slippage or addresses actively arbitraging positions.

Similarly, in lending protocols, you will find different signals that identify conditions such as liquidations or accumulating bad debt in a lending market.

Why Use the ITB DeFi Risk Radar?

The use case for the ITB DeFi Risk Radar is relatively straightforward. If you are deploying capital in DeFi at scale, you MUST MODEL and MANAGE RISK. This effort is far from simple and involves extensive data collection and computation. The ITB DeFi Risk Radar provides a solid foundation for modeling and monitoring risk in DeFi. Some additional value propositions include:

• The signals in the DeFi Risk Radar are highly actionable and have been battle-tested in protecting capital in DeFi at scale.
• The Risk Radar offers a holistic view of risk across different DeFi protocols and markets. Risk in DeFi is rarely about a single protocol but about interconnected protocols, bridges, etc.
• The signals in the Risk Radar are regularly updated as they are actively used in the ITB institutional DeFi platform.
• The signals in the Risk Radar have been validated by each protocol included in the platform.

What to Expect?

The immediate roadmap for the ITB Risk Radar includes components such as:

• More Protocols: Expect many more protocols to be included in the ITB DeFi Risk Radar in the next few weeks.
• Anomaly Detection: We plan to release sophisticated anomaly detection models for monitoring unusual activity in DeFi protocols.

For now, go evaluate the current release of the ITB Risk Radar. Many of the protocol dashboards are free and only programmable access requires a subscription. If you are interested to learn more about the platform, feel free to reach out.