LQIP-9 - Risk assessment dashboard for LUSD and LQTY tokens [7,500 LUSD]

Proposals
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1

Goals

We propose to build a 1-stop dashboard that will help assess risk for LUSD and LQTY tokens. The dashboard will display all risk-relevant information:

  • Oracle price accuracy
  • Volatility
  • Slippage
  • Liquidity
  • Concentration
  • Smart contract audits
  • Benchmark vs peers.

Dashboard will be similar to what Warden Finance has already provided for OHM token, and will be publicly available. https://www.warden.finance/tokens/OHM

Impact

LUSD is currently a big underdog in the lending space, especially given how LUSD held during the recent USDC depeg event.

The dashboard we will provide all of the risk-related information needed for lending protocols to consider LUSD as a collateral-tier asset, just like its popular stablecoin peers (USDC, USDT, DAI, etc.).

Risk managers and users will be able to benchmark key performance metrics against other stablecoins and access all protocol-specific information in one place (stability pool liquidity, total collateralization, etc.)

We will also extend our current dashboard with protocol-specific metrics for LQTY token that will help with risk management, such as distribution schedule and staked proportion.

All of this newly available information should help with LUSD and LQTY adoption on lending protocols.

Context

Warden Finance is a risk & analytics platform for DeFi. We help protocols and users manage risk by providing comprehensive exploration and simulation tooling.

We also help protocols by recommending parameter optimizations based on our in-house research, and we actively participate in governance. We’re on a mission to make DeFi data comprehensible and democratize sound risk management practices.

Our team has extensive experience in crypto, finance, and software engineering. As builders, we’ve completed several projects for notable projects including:

More specifically related to this proposal, Warden Finance team has already helped Olympus with a similar offering to help assess risk for OHM token. Warden Finance

Scope & Deliverables

The dashboard will provide the following information about both LUSD and LQTY assets:

  • Price / Capitalization
    • Current spot price
    • Market cap / TVL / Supply
  • Oracle
    • Historical spot price vs Chainlink oracle price + skew between both feeds.
  • Volatility
    • Max drawdown 1h, 24h
    • Daily volatility (24h, 7d, 30d, 1y)
  • Liquidity
    • Slippage over any trading pair, over an extensive range of trade sizes.
    • Historical dex liquidity
  • Concentration
    • Top holders (excl stability pool)
    • Distribution of holders
  • Smart contract
    • Past audits
    • DeFi Safety report
  • Protocol-specific (to be added)
    • LUSD
      • KPIs benchmark vs peers (USDC, USDT, DAI, FRAX, etc.)
        • Volatility (current + historical)
        • Dex Liquidity (current + historical)
        • Slippage
      • Stability pool KPIs
        • Stability pool concentration
        • TVL (current + over time)
      • Total collateral ratio (current and historical)
      • Hard Peg mechanisms (Arbitrage threshold, ETH redemption threshold incl fees)
      • % of LUSD in stability pool (current + over time)
    • LQTY
      • Distribution schedule
      • Staked proportion

The dashboard will be freely available on the Warden Finance platform.

We will extend the already existing LUSD and LQTY asset risk assessment pages on the platform to display protocol-specific information and to allow comparison with peers (USDC, USDT, DAI, …).

Timeline

The integration will be available within 4 weeks of the proposal passing, payment will be due upon delivery.

Ask & Payment

Budget: 7500 LUSD

Receiving address: eth:0xD513d45d3E6bCA97CB8e9cF840979273972DaC90

To be sent upon delivery.

Reference & Useful Links

Warden Finance - Risk & Analytics Platform for DeFi
Warden Finance - OHM Risk Assessment
Twitter
Telegram

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2

Hey Warden, there is currently an already Dune Analytics that touches half or more of the points raised on the Scope & Deliverables.

Information wise Liquity docs have a lot of this same information, so I am not sure how much this proposal would help out. Do you already have a defined user base for your reports or they simply become open to anyone to check?

3

Hi Netrim! Thanks for the valuable feedback.

You are right, some of the information that is specific to Liquity is available on the Dune dashboard.

However, in order for risk managers to assess the complete picture, a lot of data points are missing. What we want to do is to combine this protocol-specific information, along with information that is not available elsewhere, such as:

  • Market vs oracle price skew
  • Complete liquidity profile (DEX pools associated with asset, historical liquidity)
  • Volatility (daily vol / max drawdown)
  • Concentration

With all of this information in one place, it makes it easy for risk managers to realize that LUSD and LQTY are solid cases for getting onboarded.

Concerning visibility, we’ll be also glad to share this risk assessment to our users through our Twitter account and blog, and share it directly to our key contacts at Compound, AAVE and Notional. It will also be openly accessible to our current users on the platform, and freely available to anyone else.

Hope this helps, let me know if you have more questions

4

ok, I agree that Liquity as a whole is completely solid. But again I am not sure I understand what is the actual deliverable here.

Why is the output not done directly on Dune?
What or who is the intended audience? Risk managers is a generic term but on Tradfi such a report would be commissioned to specific firms already known.
Is such audiente already known or requesting this information?

5

Deliverable is two dashboards

  1. Dashboard that displays risk metrics for LUSD token
  2. Dashboard that displays risk metrics for LQTY token

Example: Ohm Token - Warden Finance

  1. Historical liquidity on all dex pools and real-time slippage for any trade pair would be pretty hard to crunch on Dune. As for the rest of the data, yes, it could technically be surfaced on Dune.
  2. We think that user experience can be made better on the Warden Platform than on Dune.
  3. We already have a backend that enables crunching and serving most of that data for a given asset, which is going to make implementation and maintenance way easier.

  1. In-house risk teams

    • For example, Olympus team have been requesting a dashboard for the OHM token so that they could monitor effectiveness of the range-bound stability system and change in DEX liquidity. Their in-house team monitor the metrics regularly.
    • Also, Euler in-house team would regularly validate liquidity of LSD assets (i.e cbETH) to make sure risk parameters were appropriate.

  2. Risk management contractors

    • Warden Finance is currently the only risk contractor that uses this data, although I definitely could see other risk teams leveraging the information we are surfacing. Nobody in the space tracks historical liquidity for example.
    • We will use the information from the dashboard to help onboard LUSD on Compound v2, and may use the information to tweak parameters on already existing markets (AAVE v2, AAVE v3, Compound III)
    • As an example, we have leveraged such information in the past to promote rETH as collateral on Euler, and propose parameter optimizations for FRAX stablecoin

  3. Liquity evangelists / DeFi analysts

    • Deep insights surfaced by this dashboard can make pretty solid Twitter threads / blog post to help promote Liquity.
    • Warden Finance will do its best to promote Liquity through forums and Twitter once the data is available.

  4. Users

    • Some users may be curious to know what’s going on under the hood, and may want to have a transparent outlook at how risk is managed.

Some of the audience is already known

  • Morpho, AAVE, Euler, Compound users that are using our platform.
  • Ourselves, of course :slight_smile:

Some of the audience isn’t known yet.

  • Liquity evangelists / DeFi analysts.
    • We do know a few analysts that can help promote LUSD using the insights from the dashboards, but we’d be happy to help out anyone out there that may want to leverage our data to promote Liquity through Twitter or blog post.
6

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.

7