Risk Methodology
With a vision to build dForce into the most secure and adaptable DeFi protocols, we use a multi-factor and quantitative model that looks at smart contract risk, financial risk and counterparty risk to assess risk levels before onboarding a new asset and deciding on whether it can be used as collateral to support a loan.
All new assets and collateral accepted into lending protocol need to go through risk assessment and voting process as below:
1. Discussion
2. Assessment
3. Score Card Checking
4. Snapshot
Adding new assets or collateral into dForce Lending will require governance proposal and voting. The proposal shall include multiple factors including the type of asset proposed, whether or not it can be used as a collateral, LTV (Loan to Value Ratio), borrowed assets factor, supply and borrow cap, liquidation penalty.
Everyone can make nomination on your favorite assets through dForce Forum. Our team will perform initial risk assessments for the most popular assets proposed (including risk parameters), and formulate proposal on-chain. The final decision remains in the hands of DF token holders and can only be accepted upon the approval of governance proposal through Snapshot.
All community members can join related discussions around asset assessment through our Forum. The internal initial evaluation will kick start as soon as the proposal is submitted.
Our model assesses smart contract risks by looking at the type of token proposed:
- For standard ERC 20 tokens, we’ll have an internal vesting process and provide immediate clearance.
- For ERC 20 tokens that deviate from the standard ERC 20, our developer team would need to provide formal clearance before we move into the next stage.
- For any non-ERC 20 tokens, we’ll need at least one external party (either an auditor or a well-recognized community technical reviewers’ verification) to verify and audit the code.
Test scores will be generated for each asset to give you an overall result of the risk assessment. The valid range for scores is between 0 (worst) to 100 (best).
All proposed assets need to meet a minimum score of above 60 according to dForce Risk Framework.
The voting period will last for 72 hours. If passed, we will move into execution stage, and there is a minimum of 48 hours of grace period before the approved assets are added into the protocol.
As we continue to expand beyond Ethereum and being a multi-chain and multi-layer DeFi platform, it is important that we have a flexible policy catering to our strategies while safeguarding the highest security and risk standards:
- For collaterals accepted on our Ethereum Lending protocol, it will be automatically accepted to be on our lending platforms (i.e BSC, Arbitrum, etc); these collateral listing on our protocols on other chains don’t require separate governance voting.
- For top 50 market capitalization tokens (according to coinmarketcap.com), they will be eligible for listing subject to on-chain voting. The community and core team has responsibility to provide assessments accordingly.
- Risk parameter settings are based on market standard and are all subject to governance approval.
Last modified 4mo ago