[GIP-116] Gearbox <> Chaos Labs Risk Management Partnership

Summary

This post outlines the proposed scope of work for Chaos Labs as part of a Risk Management Partnership with the Gearbox core team and community. This partnership aims to minimize Gearbox’s risk exposure in volatile markets, deter economic assaults on the protocol, and ensure the secure conservation of user funds while promoting protocol growth.

At a high level, the partnership scope is comprised of three deliverables:

• Parameter Optimizations
• Gearbox Risk Portal
• Mechanism Design Review

The proposed duration of the partnership spans 24 months, from June 2024 - June 2026.

About Chaos Labs

Chaos Labs is a market leader in risk management and optimization solutions for DeFi protocols. Our strategies are framed to safeguard protocol assets against manifold threats such as market volatility, black swan events, liquidity raids, and diverse instances of market manipulation. We meticulously craft strategies to ensure the resilient preservation of protocol assets, even under turbulent market conditions.

Our methodology is predicated on a comprehensive approach aimed at fortifying protocols against systemic risks, accomplished through dynamic and contextually responsive risk parameter recommendations. We place an emphasis on the constant monitoring of positions and liquidity to optimize the performance of protocols amidst market fluctuations.

Partnership Scope

Parameter Optimizations

As part of our ongoing commitment to optimizing risk management for the Gearbox protocol, Chaos Labs will thoroughly analyze the protocol and build custom agent-based simulations. These simulations will leverage real-world protocol dynamics and on-chain behaviors to pressure test and optimize the protocol, identifying potential vulnerabilities and opportunities for improvement. By analyzing the system this way, we can gain a more comprehensive understanding of the factors that impact protocol health and stability, enabling us to make data-driven recommendations for optimization and risk management. These recommendations will be provided to the Gearbox team and community so they can digest and analyze the tradeoffs of different parameter sets on protocol risk and capital efficiency.

Gearbox Risk Portal

Through this engagement, the Gearbox community will get access to a publicly accessible platform to monitor and analyze protocol health. Through this platform, users can delve into specific scenarios in which the protocol could be negatively impacted and receive alerts concerning significant changes to on-chain activities that could pose a risk or detriment to the protocol's health.

The Chaos Labs Risk Monitoring Platform is continuously updated with additional features and enhancements. As part of our commitment to delivering a world-class risk management solution for the DeFi ecosystem, we constantly iterate and improve on the platform. The Gearbox community will gain continuous access to the newest feature additions and enhancements, allowing users to stay ahead of the curve and make informed decisions while optimizing their overall portfolio performance.

Mechanism Design Review

As Gearbox expands to new ventures and adds new risk levers, the Chaos Labs team will conduct a mechanism design review to ensure the financial security and efficiency of new features and services. To conduct a thorough, professional review of the economic design of novel DeFi mechanisms, the Chaos Labs research team examines the design documentation and code. As part of this engagement, Chaos Labs will embark on an exploratory study focused on the Gearbox mechanism design. The primary objective will be to review the design rules, protocols, and incentive structures that facilitate desired outcomes, ultimately ensuring Gearbox’s risk protection and growth. The aim is to devise mechanisms that align individual actor incentives with the collective objectives of the Gearbox protocol.

Pricing

Understanding the phase at which Gearbox is, we propose a payment structure that will support the growth of the protocol; if Gearbox wins, Chaos wins.

The payment will be based on protocol TVL so that: Below $250M TVL Quarterly Payment: 25K USDC + 25K GEAR Annual Amount: $400K (200K USDC + 200K GEAR)

Between $250M-750M TVL Quarterly Payment: 31.25K USDC + 31.25K GEAR Annual Amount: $500K (250K USDC + 250K GEAR)

Above $750M TVL Quarterly Payment: 37.5K USDC + 37.5K GEAR Annual Amount: $600K (300K USDC + 300K GEAR)

Additional Assets This proposal includes the evaluation and new asset recommendations of up to 60 new assets annually. Should additional new asset listing recommendations be required beyond 60 per year, the additional cost will be $3K USDC + $3K GEAR per asset.

Next Steps

Pending the approval of this proposal, Chaos Labs will commence this work by June 3rd, 2024.

Disclaimer

Chaos Labs has not been compensated by any third party for publishing this post.

Copyright

Copyright and related rights waived via CC0

Legal Agreement

If necessary, Chaos Labs can sign legal agreement with Gearbox Foundation. The entity name/signators and other parameters Chaos Labs can specify directly with Gearbox Foundation.

Voting

Simple Approve/Reject voting