Empowering Growth and Resilience in Frax Lend
IntoTheBlock's Comprehensive Risk Management Proposal
In the rapidly evolving DeFi landscape, risk management is crucial for the sustainable growth of decentralized financial protocols. IntoTheBlock (ITB) proposes to develop a comprehensive set of risk management solutions for Frax Lend and its community. This proposal aims to revolutionize risk management in DeFi by driving innovation, transparency, and long-term viability for the Frax Finance ecosystem.
With two years of deep involvement in DeFi and offering analytics and quantitative strategies through its platforms, ITB plans to provide real-time economic risk monitoring tools for institutional and retail investors participating in Frax Lend. To accomplish this, ITB seeks a grant of $60,000 to develop an open dashboard monitoring general and pool-specific risk indicators, including CSV downloads of underlying data and API access for core contributors.
The risk management dashboard will be hosted on ITB's renowned risk radar product and integrated into the FraxFacts site, enhancing accessibility and transparency. Leveraging ITB's experience in managing risks for large balance sheets in the crypto industry, these tools aim to attract institutional investors while safeguarding the interests of the Frax Lend community.
The proposal outlines milestones for implementing the risk management tools, with the grant payment tied to specific deliverables. ITB commits to ongoing maintenance and improvement, requesting an additional annual fee of $15,000.
By adopting this comprehensive risk management framework, Frax Lend aims to establish itself as a pioneering DeFi protocol prioritizing transparency, resilience, and sustainable growth. These data-driven risk management solutions empower investors to make informed decisions, mitigate risks, and contribute to the long-term success of the Frax Finance ecosystem.
Specification & Implementation
ITB is requesting $60,000 to develop near-real-time economic risk monitoring and analytics for the Frax Lend protocol. The grant will cover the following deliverables:
Economic Risk API: A REST API that enables access to numerous economic risk indicators within the Frax Lend protocol.
Economic Risk Dashboard: A web interface displaying visualizations of the most important risk indicators.
Documentation: Comprehensive documentation covering all risk indicators included in the release.
The deliverables will be divided into three main milestones, with a payment of $15,000 upon completion of each milestone. Additionally, an upfront payment of $15,000 and an annual maintenance fee of $15,000 are required.
Frax Lend ITB Grant Milestones & Payments:
1. Upfront payment ($15,000)
2. Indicators 1-6 (dashboard + API) ($15,000)
3. Indicators 7-11 (dashboard + API) ($15,000)
4. Documentation covering Frax Lend's risk dynamics and indicators ($15,000)
The release will incorporate the risk indicators of the 15 collateral assets supported by the Frax Lend protocol at the time of writing.
The proposed layout of the risk indicators can be viewed in the Figma mock-ups shared by ITB's design team here and here.
The risk indicators are subject to modification based on community feedback and the Frax Lend team's input. ITB is committed to continually upgrading the indicators as Frax Lend expands and incorporating feedback from the community to enhance the usefulness of these risk management tools over time.
For ongoing maintenance, ITB also requests an additional annual fee of $15,000.
Important Risk Indicators in DeFi
To provide a glimpse of the risk indicators, here are some of the key risk indicators in DeFi that will be included in the Frax Lend risk management tools:
Risk Loans: This indicator measures the value of loans that are secured by volatile collateral and are within 5% of being liquidated. Monitoring this indicator is crucial as it can signal potential problems for the protocol, alerting users to risky loan positions.
Liquidators Leaderboard: This indicator highlights the top liquidators in the protocol based on their profits and the number of successful liquidations they have executed. It provides valuable insights into the activity of liquidators and helps identify those who are active and capable of providing liquidity to borrowers.
Liquidations Volume: This indicator measures the total value of assets that have been liquidated by liquidators. By tracking the liquidation volume, users can assess the overall health of the protocol and identify trends in liquidation activity.
Open Liquidations: This indicator shows the number of positions that are pending liquidation. A high number of open liquidations can be an early warning sign of potential insolvency in the protocol, indicating a significant amount of debt that may not be repaid.
Collateral Asset Liquidity: This indicator evaluates the total dollar and asset value of collateral assets available on decentralized exchanges (DEXs). Understanding the liquidity of collateral assets helps identify potential issues and assess the overall robustness of the protocol.
Liquidation Profitability Simulation: This indicator presents a simulation of the projected profit that liquidators would make if they were to liquidate a given position. It helps assess the profitability of liquidations and identify potential problems within the protocol.
Blocks Elapsed to Complete Liquidations: This indicator measures the number of blocks required to complete liquidation. Monitoring this metric helps evaluate the speed of the liquidation process and identify any potential bottlenecks or inefficiencies.
Net Liquidity Flows: This indicator tracks the inflows, outflows, and net flows of liquidity into the protocol. Understanding the overall liquidity dynamics is crucial for assessing the health and stability of the Frax Lend ecosystem, as well as identifying trends in liquidity activity.
Net Loans Flows: This indicator measures the inflows, outflows, and net flows of borrowing activity within the protocol. Tracking these flows provides insights into whether the amount of FRAX being borrowed is increasing or decreasing, helping users gauge the demand for borrowing and potential risks associated with excessive borrowing.
Whale Liquidation Price Levels: This indicator identifies the price levels at which whale loans would be liquidated. Understanding these price levels is essential for evaluating the potential impact of whale liquidations on the protocol and assessing the risk exposure associated with large positions.
Collateral Distribution: This indicator displays the distribution of assets provided as collateral for borrowing FRAX. It helps users understand the level of exposure to each collateral asset and assess the diversification and risk profile of the protocol.
By providing access to these risk indicators, Frax Lend users can make more informed investment and lending decisions.
Conclusion
The proposed grant by IntoTheBlock aims to enhance risk monitoring in the Frax Lend protocol by developing comprehensive risk management tools. It seeks to democratize access to risk models for all participants, promoting transparency and contributing to the safety and growth of DeFi.