Real Time DeFI Risk Metrics

Executive Summary

Exponent extends a proposal to GRO DAO by offering market risk analytic products and on-going services in order to increase resiliency of Gro Vault’s AUM

Problem

Gro DAO has started planing a long term strategic direction to increase the resiliency of the protocol.
We believe the steps taken so far, such as:

  1. Implementation of stop loss and reduce maximum exposure.
  2. Allowing for the community to vote for whitelisted yield strategies.

These are prudent initial steps towards keeping assets safe and mitigate risks.

Exponent team believes that the DAO can further benefit from our contribution in the form of real time risk analysis and active risk systems.

Namely, the priority for Exponent will be on Strategy / Market Risk, according to the GRO’s Risk Management Scope specs

The solution

DeFi markets are continuously evolving with high degree of volatility, while passive diversification via Curve pools (main yield strategy on the Gro Vault) and tranches has helped with risk management, we believe that:

  • There are live DeFi indicators that further signifies the health of the underlying assets, which is different from the time of the asset inclusion into the protocol.
  • Health of an asset, after exceeding a certain threshold, should be flagged for risk mitigation, whether through automated alerts or prompts to the DAO strategists to take next actions.

Exponent’s proposal comes in two parts:

  1. Risk framework
  2. Risk Solutions

Part 1: Risk Framework

We will assist Gro DAO in identifying the following within the Market/Strategy risk profile:

  1. Break down the overall portfolio market risks into different risk parameters
    a. including but not limited to: depeg risks, slippage and price impact, and TVL fluctuations
  2. Identify leading metrics and indicators for each risk parameters as well as trigger thresholds
    a. for example with lower cap stable coins, we can observe Curve’s pool imbalance as an early indicator for a price depeg event
  3. Work with the DAO to outline path to process implementation that is compatible with current Governance process.
    a. drafting alert templates and incident management plans, outline degrees of incident severity for each market risks parameters

Part 2: Risk Solutions

Real time risk monitoring system

analytics and alerts for the Risk Team

Exponent team will create a bespoke, user authenticated dashboards that will monitor real time risks for Gro Vault with the necessary on-chain risk indicators. The risk systems would be able to detect and submit alert messages to Gro DAO’s Discord (or any target communication platforms) in a condition where risk metrics have reached an agreed upon threshold.

Exponent team will manage the service with up-time expectation and high degree of data integrity as a mission critical health observability tool for the Risk Team.


:point_up: Example of an access to soft-real time dashboards with DeFi protocol related indicators, alert messages are triggered from the metrics

Public Dune Analytics Dashboard

for public & transparent community assessment to protocol health
We believe in the spirit of open source and building community first products. Which is why, in addition to the above, we will publish a Dune dashboard for the Gro community to inspect health of the protocol in ways that are more insightful than what is being offered on the dApp

metrics on monitoring tools will be updated to reflect current asset inclusions on an on-going basis

Governance supports

in reviewing whitelist proposals and portfolio analysis

Risks management is a never ending effort. Thus, analytic products won’t be sufficient. As more Curve Pools are added to the protocol, Exponent team will also take the time to review new asset inclusion, evaluate risks and commit to active participation within the DAO governance forum and Snapshot vote. We will take part in war-room incident management scenarios when market risk hits a critical threshold inside the risk channel

We believe in order to grow Gro Vaults AUM responsibly, having inputs from the value aligned strategists outside of Gro core team will offer higher redundancy, fresh perspectives and be instrumental to the decentralization of the protocol, especially as the Risk sub-DAO continues to grow.

About Exponent

Exponent is on a mission to unlock treasury deployments at scale for Web3 organizations. We enable DAOs to unlock, preserve and grow their capital. We are a team of ex-finance, web3 engineers and data nerds who are as excited as you about the future of work.

We have come across Gro before and are excited about the benefit of DeFi yield tranches as a potential consumer but also as a solution to offer in our ever growing tool suites to support the health of DAO treasuries.

You can find out more about us:

https://twitter.com/Exponent_cx
exponent.cx

Service Agreement

We are asking for the below as remunerations for the work proposed:

  1. 14K in USDC paid up-front after the proposal approval in order to start product development and risk framework analysis concurrently
  2. 6.5K USDC monthly recurring payment for the services operations, maintenance and continued participation in risk sub-DAO. The recurring payment only starts after risk monitoring systems and dashboard is live
  3. 350K GRO linearly vested over the entire duration of the service

The scope of the monthly recurring payment will continue over a period of 6 months, renewal at the end of the period. The software will be actively maintained with full development and strategist support.

Closing

We would like to request the Gro DAO for feedback and possible revisions to be made on the proposal.

In closing, we would like to highlight that Gro protocol has an obvious points of alignment with Exponent. We hope to continue explore future collaboration beyond the scope of the work stated here, as both active sub-DAO members and advocate of Gro vault products.

1 Like

Thanks @exa256.eth for sharing this proposal! Would you be able to share any public dashboard you’ve done for other protocols before for reference? It’d be very helpful to see what you’ve implemented before for the community to visualise the output :pray:

1 Like

Yes, happy to share :slightly_smiling_face:

Here is a link to the Dune Dashboard for our yield bearing treasury vault

an example live metrics and alerts we are currently tracking for Aave and Compound, this one is public so you wouldn’t see the configured alerting rules