MGP-4 Moonwell-ITB Risk Management Tools Phase II

Proposals Moonwell Grant Proposal
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MGP-4 Moonwell-ITB Risk Management Tools Phase II

Authors: IntoTheBlock Research

May 22, 2023

Summary

Phase I of ITB’s Risk Management Tools were successfully launched, with indicators being freely accessible through the following link. In addition, CSV downloads for each metric are available within the platform, API access was shared with core contributors and extensive documentation was provided diving into the indicators.

To further expand risk management capabilities for Moonwell, ITB seeks to apply for Phase II of the grant, targeting the following deliverables

  1. 10 new indicators to add to the risk dashboard
  2. API access and CSV download for all metrics
  3. Documentation of Moonwell’s risk indicators and general dynamics
  4. Add Base (Coinbase L2) support for risk metrics

Overview

Over the past two years IntoTheBlock has been heavily involved in DeFi. This started with the launch of DeFi Insights analytics and has grown significantly through our Institutional Quantitative Strategies (ITB Quant) service. ITB’s DeFi Quant platform acts as a gateway used by 20+ of the largest crypto institutions to access its DeFi yields via sophisticated quantitative strategies with appropriate risk management models. Moonwell’s strategy is one of the latest additions to the ITB DeFi Quant platform, with ITB clients depositing several millions into the protocol.

To streamline institutional adoption of DeFi, IntoTheBlock decided to make risk metrics and models accessible via APIs and analytics dashboards. The purpose of this proposal is to make these risk models available to Moonwell’s institutional and individual investors.

Motivation

Monitoring and managing risk is paramount to any financial service. Recent events in the DeFi market prove that risk management is essential to accelerating the growth of the space. At ITB we believe that risk management in DeFi should be done out in the open, following crypto’s ethos, and not be a luxury expense.

Following ITB’s experience safeguarding hundreds of millions into DeFi through advanced risk management models, we believe that expanding these tools and offering them to Moonwell would help make DeFi safer over the mid-to long-term. Enabling Moonwell’s community to monitor real-time economic risks should be a key factor in boosting institutional and retail investor confidence.

Implementation

IntoTheBlock has structured this grant within two phases. After successfully shipping all deliverables from Phase I on time, IntoTheBlock is proposing to continue forward with Phase II with the following:

  • 10 new indicators to add to the risk dashboard (specific metrics are covered within the following document)
  • API access and CSV download for all metrics
  • Documentation of Moonwell’s risk indicators and general dynamics
  • Add Base (Coinbase L2) support for risk metrics

These indicators are open to modification after receiving feedback from the Moonwell community and other Moonwell contributors. IntoTheBlock is dedicated to maintain and expand the capabilities of the Moonwell risk monitoring solution that address changes to the protocol or market conditions.

Grant Milestones & Payments

For Phase II, IntoTheBlock is requesting a total of $30k upon the start of the aforementioned deliverables.

We are targeting a launch 30 days after the proposal passes for Phase II.

The exchange rate of WELL/USD will be the 30-day time-weighted average price (TWAP) prior to the date the proposal is approved. The price source will be the close price of WELL published by CoinMarketCap.

The release of these milestones will also be accompanied with a marketing push from the IntoTheBlock team to increase the visibility of these tools.

Conclusion

IntoTheBlock’s proposal looks to expand the offering of real time economic risk monitoring for the Moonwell protocol. The risk indicators included in this proposal are based on IntoTheBlock’s experience managing and monitoring risks for institutional clients depositing into Moonwell and similar protocols. This release is part of a broader effort to democratize access to risk management tools for all DeFi users, including those of the Moonwell protocol.

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We think this proposal brings clear value to the Moonwell community. From our understanding, this is a good opportunity to 1) attract activity on the protocol and 2) improve risk management.

  1. Increased activity on Moonwell through ITB DeFi Quant platform clients.

    • This is good news for current users, as this may increase lending yields, markets liquidity, etc. Really curious to hear more about the expected size of this impact, as this may be very positive for the protocol’s health.

  2. Expand risk management capabilities for Moonwell

    • The phase III dataset looks overall very useful from a risk management perspective, especially the liquidator estimated profitability.
    • Recursive lending share is also a very important KPI to track for a any lending protocol that gives lenders and borrowers rewards. This is something Warden Finance will definitely look at.
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Glad you find the value in the proposal and thanks for the support.

We will move the proposal to a vote shortly.

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Excited to have Base support for risk metrics. Very needed, and excited to stay ahead of the game here.

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Thanks, we hope this helps Moonwell attract capital once the protocol launches on Base.

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Proposal has been submitted for a Snapshot vote: Snapshot

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Proposal is now up for an on-chain vote following a successful Snapshot vote Moonwell: DeFi's Liquidity Well