Weekly RiskDAO report 10 Jan ‘23

All referenced data can be accessed directly on the Vesta dashboard by RiskDAO.

Summary

Ethereum’s Shanghai hard fork is planned to go live at the end of Q1 2023, which will enable withdrawal of staked Ethereums. Withdrawals will improve the staking experience on Ethereum and the economics of liquid staking protocols. The associated protocol tokens (eg $LIDO, $RPL) have been at the center of crypto market price action and seen significant rallies.

Arbitrum-based, perpetual swap protocol Mycelium got exploited as the ETH-USD price feed went down.

Messari publishes “State of Liquity Q4 2022” report.

Moonwell users suffered $800k in unjustified liquidations as a parameter change (for “collateral factor”) by Gauntlet included incorrect decimals. This mistakenly set the “collateral factor” almost to 0 (6400 instead of 0.64e18). The collateral factor determines if a position is eligible for liquidation. A collateral factor near 0 caused the protocol to allow users to be liquidated, who otherwise had well funded accounts, because it effectively discounted the borrowing power enabled by USDC collateral deposits by over 99.9%.

A reimbursement plan is currently discussed, which would include a combination of funds from the reserve fund (which takes 30% of all liquidation profits) and the remainder being paid by Gauntlet (equivalent to the liquidators’ profit).

What’s interesting about the Gauntlet incident: Gauntlet’s approach utilizes a simulation environment for all parameter changes. Yet, in this case the simulation did not catch the mistake as the collateral factors were inserted manually.

Dashboard Highlights

The cap utilization of gOHM has stayed around 90%.

The VAR for the worst day simulation stands at zero. Current MCRs are at recommended levels (ETH-Vault) or well above them (all other).

The weight of $VST in the VST-FRAX remains at 70%.

Total pool collateral is hovering around $22m. gOHM remains the #1 collateral asset accounting for $14.3m or 65% of total collateral base, followed by sGLP which stands at $4.5m (20.6% of total collateral).

Based on existing mint caps, the MCR for DPX is slightly below recommended levels. This should be monitored.