Proposal: Gauntlet Market Risk Management

Summary A proposal for continuous market risk management to optimize yield, capital efficiency, and mitigate depositor losses.

Background Venus’s previous interest rate model 6 and conversations with the Venus team shows the importance protocol stakeholders put towards understanding and mitigating risk. Over the past few years, Gauntlet has deployed our simulation platform to similar lending protocols and we are happy to state Gauntlet’s work has resulted in strengthening protocol structure and we continue to make parameter recommendations to optimize for capital efficiency as well as reduce insolvency risk.

Preventing insolvency is not the only market risk Venus faces. Deflationary spirals and shocks to market prices can’t simply be prevented without reducing the protocol’s utility. Tail-event scenarios are rarely the result of bad actors taking malicious actions against the protocol. The vast majority of Venus’s participants are honest but what’s good for the lender is not always good for the borrower. Depositors lend, borrowers borrow, and liquidators rebalance. This intersection is where Gauntlet comfortably sits, directing traffic per the stated desires of the community.

Gauntlet will onboard and then continuously rerun our simulations for the Venus Protocol, pushing regular changes to ensure optimal risk parameters. We will also deploy our asset listing framework to ensure new assets being proposed for the Venus Protocol meet the market risk standards that the community has set forth.

For complete details of the proposal, please see link below.