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DeFi Pulse launches risk assessment tool, Aave and Compound receive highest security rating

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DeFi Pulse launches risk assessment tool, Aave and Compound receive highest security rating

In order to reduce the barriers to entry and high-risk issues in the DeFi field, DeFi Pulse has partnered with Gauntlet to develop a new tool to measure the risk of projects within the DeFi ecosystem. Under the standards of this tool, Aave and Compound, the two major lending protocols, have received the highest level of security rating.

DeFi Pulse Economic Safety Grade

In the past few months, the DeFi sector has experienced explosive growth, with many new projects emerging to offer users abundant and enticing investment opportunities. However, this surge includes numerous unaudited protocols. Despite the fact that most projects declare their code unaudited, users, driven by information asymmetry or financial incentives, continue to forge ahead until regret sets in after incidents like code vulnerabilities, platform exits, and hacking attacks occur.

At present, the DeFi sector lacks proper risk assessment standards, leading off-chain users investing in DeFi protocols to bear higher risks. To address the issue of information asymmetry and uncertainty in the DeFi sector, decentralized finance data platform DeFi Pulse has collaborated with DeFi system simulation platform Gauntlet to develop a new tool for measuring the risk of projects within the DeFi ecosystem.

This tool will review the design, parameters, and data of protocols, including collateral volatility, relative collateral liquidity, user behavior, protocol parameters, smart contract risks, etc., and provide a final score based on a scale of 1 to 100. The tool's Alpha version has been launched, with full functionality still under development, and the smart contract risk assessment feature is not yet active. DeFi Pulse stated in a tweet:

"'DeFi Pulse Economic Safety Grade' is a risk assessment standard created by combining data from centralized and decentralized exchanges with on-chain user data to evaluate market risks through simulations. The focus of the grade is on the risk of bankruptcy, in other words, the risk to depositors."

Aave and Compound Receive Top Ratings

After analyzing historical liquidity and volatility data, the risk assessment tool has completed safety ratings for the two most popular DeFi protocols in the current market, Aave and Compound. The evaluation results show that Aave scored 95 points, while Compound scored 91 points, both falling in the 'very safe' range (90 points).

Gauntlet explained that both projects have relatively high safety coefficients, but in the model, they also assessed the 'risk of users borrowing stablecoins using other collateral types in the system.' In this aspect, stablecoin borrowing on Aave accounts for approximately 70%, while on Compound, it is around 90%.

Continuous Release of New Products by DeFi Pulse

DeFi Pulse has made significant contributions to the DeFi sector. In mid-September, the platform collaborated with decentralized asset management protocol Set Protocol to launch the 'DeFi Pulse Index DPI,' composed of ten DeFi tokens.

Subsequently, in early October, it announced the formation of a decentralized governance organization 'Index Coop' responsible for governance decisions regarding DPI and future index products, issuing governance token INDEX through liquidity mining. As of now, thepool for INDEX has attracted over $24 million in funds.