Risk Management Update for December 8, 2022

Welcome to a new edition of the Risk Management Update! Let’s get right to some protocol metrics, vault updates, and what’s new at the QiDao Risk Matrix.

Collateralization Metrics

There has been little movement in collaterization ratios for stable/volatile assets and collateralization across chains. Our current stable/volation ratio is 35.7% stable collaterals and 64.3% volatile assets. Polygon remains QiDao’s largest chain providing 52.7% of collaterization assets, followed by Fantom at 20.6% with Optimism and Ethereum vying for third place at 8.5% and 8.4% respectively.

We expect a further increase in stable collateral as soon as data for the MAI-DAI LP is added to the matrix metrics as that LP currently has a TVL of over $600k.

Due to market volatility, there are no longer any A grade assets on the list, with BNB now the highest rated collateral, followed ETH on Ethereum, then WETH and WMATIC (and their Aave Market interest bearing derivatives) and WBTC on Polygon taking the top spots. Collateralization by risk grading is currently as follows: A graded at 0%, B graded at >91%, and C graded at <9%.

The top ten collaterals by total borrowed MAI are shown below.

The Vault Watchlist

Below is a list of vault collaterals that are marked for potential deprecation. The risk management committee plans to introduce a QIP (QiDao Improvement Proposal) to set formal guidelines for deprecation in the next couple of weeks. Debt ceiling raises on the following vaults have already been paused and it is the committee’s recommendation to remove these vaults completely.

  1. DODO (BNB) — low liquidity and usage, and high trade slippage.

  2. SUSHI (FTM) — low liquidity and usage, and high trade slippage. Further concerns on volatility as a result of a recent proposal to move all fees directly to the protocol treasury instead of distributing to xSUSHI holders.

  3. AAVE (FTM) — low liquidity and usage. Aave has pulled out of Fantom due to lack of protocol usage on the chain.

  4. FXS (Polygon) — Centralized liquidity.

  5. dQUICK (Polygon) — this vault should be deprecated and replaced with a newQUICK vault.

Website Updates

Some great new features have been added to the risk matrix website since our last Medium update. They include new scripting to automate a great deal of data acquisition to provide nearly real-time protocol metrics, as well as the addition of price charts and comparative volatility charts within all collateral rubrics.

These charts provide a broader picture of a collateral’s price volatility over time and compares it to deFi stables WETH and WBTC for context.

This work has allowed us to implement stablecoin tracking within the dashboard which showcases MAI’s price volatility in comparison with similar stablecoins such as alUSD (Alchemix), LUSD (Liquity), MIM (Abracadabra), and sUSD (Synthetix).

The dashboard now also tracks protocol TVL (total value locked), and will soon add global MAI collateralization percentage. More features and tweaks are planned before the end of the year before we move into tracking protocol revenue as well. More details on that soon.

If you’d like to get in touch, find us on Twitter, @qidaorisk or on QiDao’s Discord.

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