DeFi analysis platform, DeFi Pulse has introduced a new safety rating in the alpha version. can compare the risks of on-chain protocols. However, the rating system is still under development and does not take into account all risks, such as smart contract risks.
By working with Gauntlet, a digital asset modelling platform, this valuation tool can examine key factors such as user behaviour, collateral volatility, relative collateral liquidity, protocol parameters and intelligent contract risk. Then each project is given a risk profile between 1 and 100.
The Aave and Compound protocols are the first items to be reviewed in the new Economic Security Level plan. Both platforms received 95% and 91% score respectively. MakerDAO is the next agreement to be evaluated.
DeFi Pulse added that in this first alpha, the levels are constructed by analyzing historical liquidity and volatility data to find the collateral that is most likely to cause problems. However, the team added that the results need to be normalized before ranks can be given.
Gauntlet indicated that the assessment tool was not designed to model smart contract risk. He claimed that auditors and formal review tools are best suited to assess this form of risk. Also, he stressed that the security rating indicators are still at an early stage.
“An astute observer might have noticed we omit the case where the protocol is illiquid. We hope to model this as well as a few other things as we build towards a beta release.”
DeFi and Platforms and Volatility Risks
Currently, the system seeks to determine the possibility of bankruptcy in an audited chain loan agreement.
Earlier this year, the DeFi platform Maker suffered a major liquidation incident due to strong price volatility. In one day, $8.32 million disappeared in what was later referred to as “Black Thursday”. Gauntlet hopes his tools can help prevent future crises similar to Black Thursday in the cryptocurrency space.