LQIP-7 — Hire Exponent to create a risk report for the following Liquity strategies: LUSD Stability Pool, LUSD Curve Pool, and bLUSD [2500 LUSD]

Hi everyone! I’m submitting the following proposal as a part of the Exponent team. Feedback and questions from the community are encouraged!

1. Goals

This proposal will create an educational risk report to inform DAO treasury managers and fund managers of both the risks inherent to LUSD (asset-level risk) and the differences in risk and return between the LUSD Stability Pool, LUSD Curve Pool, and bLUSD (strategy-level risk). It will include explanations and analyses of each of the three strategies, with a focus on facilitating understanding of financial risks and risk associated with underlying protocols.

The report will augment existing information about LUSD and LUSD strategies in order to inform DAO treasury and fund managers about protocol and market risks and make well-informed decisions about using each of the three LUSD strategies and appropriately balance the risks of their positions in accordance with their risk appetites and needs.

2. Benefit & Impact

The risk report is primarily educational, and will lower the barriers to understanding LUSD strategy mechanisms and risks. Thus, we expect the report to both facilitate better understanding of the available strategies, increase participation in the Liquity ecosystem, and encourage participants in the ecosystem to behave rationally with a robust set of market information.

Publicizing a high-quality risk analysis of LUSD strategies that’s geared toward DAO treasury managers and fund managers will 1) increase awareness of those strategies, 2) increase the risk-related knowledge of LUSD strategy participants, and, as a result 3) make LUSD markets more efficient.

3. Context

There is an abundance of information about LUSD and its strategies already available, including excellent documentation and data presented in dashboards. However, the scope of existing documentation and data is wide and rightly not oriented toward an investment narrative—it does not directly facilitate on understanding of the risk of LUSD strategies. The risk report we propose aims to explain the economic and technical mechanisms of LUSD for the express purpose of diving deeper into the the strategies to allow investors to understand risks and make informed strategic decisions. In the process of explaining strategy risks, the report will necessarily cover LUSD’s economic mechanisms, making it an excellent way to understand LUSD strategies as investments.

The Exponent team has worked on and with DAOs, protocols, and companies that deal with risk every day, such as BanklessDAO, Index Coop, Beanstalk, Flipside Crypto, Dune Analytics, and more. Our members hold positions on Gro DAO and the Enzyme Technical Council, and Exponent is a member of the Safe Guardians program. We have a team of qualified analysts and risk experts that will work on the report.

4. Scope & Deliverables

The closest example we have to the risk report that will be delivered is the Aura bb-a-USD Risk Strategy Report that Exponent created for the Origin DAO. The needs of Origin, however, are different from the needs of Liquity. After discussing the report with some community members, we determined that the Liquity report will be structured as a narrative that begins with a cursory understanding of protocol mechanisms and then walks through a risk assessment that guides readers to understand invariable risks and use dashboards to understand risks that might vary based on on-chain information like certain market and liquidity conditions. While the Aura risk strategy report covered just a single strategy and provided a recommendation to Origin on whether they should implement the strategy, the Liquity Risk Report will address three separate strategies.

5. Timeline

The report will be delivered within 4-6 weeks of the proposal’s passage, and payment will be due upon delivery.

6. Dependencies

Although the risk report is an original analysis, it will reference third-party documents such as existing Dune dashboards, audit reports, and on-chain information.

7. Ask & Payment

Exponent will be hired to create the Liquity Risk Report scoped in this proposal and 2500 LUSD will be sent to treasury.xpn.eth upon the delivery of the report. No funding is required up front. We can create an invoice.

8. References & Useful Links

Exponent Website
Aura bb-a-USD Risk Strategy Report
Exponent Twitter

Hey quasimatt, this links seems to be broken.

Following up on some questions:

Why is the output a static report?
Why is it not done thru Dune?
Who is the intended audience for this?
Do you already have a comission for such a report?

Thank you for participating, voting has closed and your proposal has not passed.

You can always present a new proposal in the next cycle.
I do recommend you gather feedback from users on discord on how to maximize your chances to be selected.