[PASSED] Risk DAO & Vesta Partnership

General Protocol
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Summary

Risk DAO is a service DAO that aims to build open-source tools and resources to make lending, borrowing, and collateralized debt positions (CDP) protocols safer and the risks more transparent for users. Vesta being a CDP protocol managing millions of dollars worth of users’ collateral, there was an essential need for objective third-party risk assessments and frequent monitoring. Risk DAO proposes this service.

Motivation and Value Add for Vesta

Risk analysis in DeFi is a crucial topic, even more so when the protocol is offering users to lock funds in its smart contracts and is issuing a stablecoin. There are a ton of metrics to monitor continuously, which is quite time-consuming. Outsourcing this work to a professional team, like the one from Risk DAO, is a win-win strategy. The Vesta core contributors have more time to allocate to other important tasks, and the expertise of Risk DAO continuously evaluates the risk. As a result, Vesta is safer, and the core contributors have more time to build the future of the product.

Proposal for Risk DAO impact and responsibilities

Vesta will consult Risk DAO for every decision involving its core parameters like:

  • Recommendation of risk params
  • Alerts on changes in liquidity of collaterals and $VST
  • Monitoring asset volatilities
  • Stability pool size

Moreover, the partnership will also include two other essential missions:

  • Analysis of potential new collateral types
  • Monitoring prominent user positions

Target Metrics

  • Increasing overall capital efficiency of the platform through decreasing system collateralization ratio down by 20% since start of engagement by the end of the quarter
  • Help Vesta with onboarding at least one new collateral per month
  • Actively assist Vesta with delivering Vesta V2 by the end of 2022 Q3

The compensation for these duties is $50k per quarter, divided into two-thirds in stablecoins and the rest in $VSTA. The stablecoin payment will be executed immediately at the end of each quarter, and the $VSTA payment will be calculated with a 30-day weighted average price, with a vesting time of three month cliff. Vesta will utilize its treasury to pay for this activity. The partnership will last for a quarter to start with but will be renewable at the end of each quarter. The partnership shall be terminated by either party at will.

The Vesta core contributors strongly believe that this cooperation is an essential step for its current and future security. It is critical to prevent undesired events such as insolvency and other liquidity problems.

Feedback Period

The feedback process begins now and is expected to end at 12AM UTC on 28/06/2022. After this, a Snapshot vote is expected to be put up at 9PM PDT on 05/12/2022 if there is sufficient interest and support for the proposal from the community.

Actions

For: Action taken if this proposal is accepted.
Against: Action taken if this proposal is rejected.

3 Likes
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I’d support the protocol becoming more transparent for users when it comes to risks for vault users, and stability pool LPs.

Two important components are necessary here:

  1. If the agreement is quarterly, it should be a contract that lasts one quarter and renews quarterly, rather than an open ended agreement in order for the teams to assess the relationship and value Risk DAO brings on a period basis.
  2. There should be clearly defined metrics the Vesta team wishes to achieve with Risk DAOs help. This scope of work needs to have specific goals and measurable metrics that demonstrate how Risk DAO contributes to growth of Vesta (TVL, vaults, users, etc).
3 Likes
3

Thanks for your feedback here. I’ve just added a couple target metrics and changed the wording of the duration of the engagement to be on a quarterly basis, with the option to renew at the end of every quarter. Please also note that there’s also an at-will termination clause, allowing either party to end the arrangement at anytime should there be dissatisfaction.

3 Likes
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The first report we prepared for Vesta allowed them to:

  1. significantly decrease liquidation penalty to few collaterals
  2. increase the debt ceiling for dopex
  3. lower the emergency collateral ratio to the normal one.

That said, over time, and as market conditions are changing, recommendations could also be towards the more conservative direction, and there is an inherent conflict of interest between growth and risk analysis.
One can hope that transparent risk analysis will help grow adoption and trust from the community. But we are obligated to depict the underlying risks of the system even if it would temporarily come on the expense of growth.

3 Likes