Counter-Protocol Tech and Economic Risks

The goal of vaults is to strike a balance between preventing exposure to tail technical risk, while giving vault managers the freedom to take on counter-protocol economic risks, since the latter is frequently rewarded while the former is not.

Some of the key tech risks we consider:

  • Track record of the protocol

  • Admin key existence and management

  • Existing audits

  • Protocol tech risk hedging opportunities

  • Degree to which the protocol is prone to manipulation

Some of the economic risks that we consider:

  • Economic exploit risks

  • Economic stability risks

  • Collateralization risk (if a system is under-collateralized)

Last updated