Renowned analytic platform for decentralized finance, DeFi Pulse, in its partnership with Gauntlet, a digital asset modeling network platform, has released a new analytical tool that seeks to assess and compare the level of risk on assets that are on the on-chain protocol.
The tool will be programmed to take things like the behaviour of users, collateral volatility of tendered collateral, the collateral liquidity, and even smart contract risk. However, because the tool is still undergoing development, it presently cannot assess all of those risks stated earlier.
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DeFi Pulse in a released statement made it known that the tool, which is still an alpha version, would grade protocols by taking into account the previous available data on liquidity and volatility of the protocols so as to find collaterals that may likely cause problems in the future.
Gauntlet, on the other hand, says it hopes the tool would be able to prevent Black Thursday crisis in the crypto industry.
How DeFi Pulse Tool grade will work.
The tool is expected to give each protocol a grade between 1-100 after it might have taken all necessary risk and measures into consideration.
According to the released data by Gauntlet, protocols that receive a rating of “above 90” are those protocols that are very safe and the probability of an investor/depositor losing his investment is almost zero ie impossible.
Protocols that have a rating between “80-90” are also safe but they are not as safe as those with higher ratings. While protocols with a rating of “65-80” could make a depositor lose their deposits especially when the market conditions are at an extreme.
Protocols with the “50-65” rating have a higher chance of making depositors lose their deposit in extreme market conditions and any protocol with a score less than 50 could make depositors lose even in normal market conditions.
