Introducing Risk DAO

Risk DAO
Published in
3 min readMay 25, 2022

We’re excited to announce the launch of Risk DAO — a service DAO spearheaded by B.Protocol and 1kx that will focus on providing a new, open source risk assessment framework and associated audits to DeFi lending and borrowing protocols as well as L1 networks.

Why Risk DAO?

Lending, borrowing, and CDP protocols account for over 30% of DeFi’s $110B total value locked. As a dominant sector in a rapidly growing industry, it’s important that we build open source tools and resources to make protocols safer and the risks more clear for users. Risk DAO will aim to do just that.

Tens to hundreds of millions of dollars have been wiped out or put at risk due to economic exploits and/or mismanagement of borrowing protocols, further highlighting the need for objective third party risk assessments and frequent monitoring.

Our new methodology takes in to account real world liquidation data of popular assets from centralized exchanges, along with the price trajectory of the assets in question. We extrapolate the liquidation sizes and price trajectory to the asset we wish to analyze, and simulate the outcome based on the asset’s available DeFi liquidity. This approach eliminates most of the assumptions that are usually made in risk assessments in the DeFi ecosystem regarding user behavior during market crashes, and makes it more feasible to analyze the risk of a platform, including for multichain lending platforms, where the data for user behavior is even more sparse.

Our Services

Here’s a summary of the services we’ll offer to DeFi protocols and L1s, all of which are rendered as one time audits, with the potential for ongoing collaboration:

  • Stress tests (e.g. bad debt likelihood, liquidation performance)
  • Parameter optimization (e.g. collateral factor (MCR), liquidation penalty)
  • Survey of collateral risks (e.g. price oracle strength, liquidity)
  • Chain specific analysis (e.g. liquidity propagation time, block time and gas costs)

These various aspects of a borrowing system are analyzed through an in-house risk assessment model built by B. Protocol that’s outlined in depth here.

Work With Us

Building a new project? Looking to make your protocol more robust? Reach out on Twitter, Telegram, or Discord and we’ll handle the rest!

If you’re still unsure, explore what we’ve built further by reading Data Extrapolation Framework for Risk Assessment of DeFi Lending Platforms or the full report outlining our risk analysis framework here.

Join Us

Last, but not least, like any new DAO we’re looking for talented individuals. If you’re interested in math, risk analysis, data analytics, or becoming a researcher, join the Discord and fill out a membership request. Specifically, we’re looking for those with skills in:

• Technical Writing (academic experience is a plus)

• Designing and implementing mathematical models

• DeFi Security

• DeFi Research and Writing

• Data Analytics

After you fill out the membership request form, we’ll follow up ASAP. Note: We’ll be scaling slowly at first as we work out the kinks associated with running a new DAO, but as things get rolling we’ll continue to onboard interested applicants.