Our assets are wrapped, and so is 2022. We’re sending off a truly wild year in crypto by looking back at the risk ratings we got right, the risks we missed, and our very own Exponential milestones. Cheers to an Exponential-ly better 2023.
🥂 Here’s looking at you, frens.
Our risk framework is no-nonsense. We distill thousands of risk vectors into a single letter grade to make it easy to understand a protocol’s risk at-a-glance. This includes mapping dependencies across assets, protocols, and chains to identify potential risks. So, not to toot our own horn, but we’ve called some pretty high-profile events this year. 💅 Here’s a highlight:
- Raydium: We rated Raydium with a “Watch Out” score due to an anonymous team and lack of experienced auditors. The protocol was drained for over $4.4m after a “private key compromise” withdrew funds from various pools.
- Umami Delta Neutral Vault V1: We rated the vault with a D given the multiple protocol dependencies (on Tracer and GMX) and the low maturity of Umami. The vault incurred net losses for liquidity providers instead of generating yield,
- Clearpool and uncollateralized lending: Juicy rates have lured in investors but we have expressed healthy skepticism. All uncollateralized lending pools in Exponential are rated D or F because of the lack of incentive alignment between lenders and borrowers, and the lack of recourse for lenders. After the FTX collapse, Wintermute, Orthogonal Trading, Auros and other popular borrowers winded down all of these pools or defaulted completely.
- USDN and Vires: Neutrino USD (USDN) is an algorithmic stablecoin that resembles UST/Luna, i.e. reflexive on the way up and down. We rated USDN with a “Watch Out” and the lending pool on Vires with an “F”. Since the rating, USDN market cap is down over $600M and the “stablecoin” is currently trading over 40 cents below the $1 peg.
- DUSD and DeFiChain DEX: Decentralized USD (DUSD) is the native stablecoin of DeFiChain that was initially minted through over-collateralization but has since become undercollateralized due to the introduction of an algorithmic mechanism to mint DUSD by burning DFI, the native blockchain token for DeFiChain. All market making pools on DeFiChain DEX paired with DUSD are rated D or F due to this exposure. Since our coverage, the DUSD “stablecoin” has seen its value decline another 25%+, and is now trading at ~$0.58.
We can’t be stewards of the most trust-worthy DeFi investment platform without owning up to our mistakes 😭
- Aave and Compound: Both currently rated as “Best” but the attack on Aave in November, where a whale tried to exploit an economic vulnerability on how collateral assets work, made us rethink how we score lending protocols. We are in the process of updating our Risk Framework to reflect more accurately how lenders could incur losses based on the quality of the collateral these protocols accept.
- Ankr: Ankr offers a liquid staking platform for Proof-of-Stake (PoS) assets but had centralization risks around its admin key given a lack of multisig or timelock. The aBNBc token, liquid staking receipt for BNB staked via Ankr, was exploited after a private key compromise led to the attacker freely minting to their own address. We correctly penalized them for this governance issue but the severity was not enough. We are in the process of updating our Risk Framework to more accurately reflect the governance risks of admin keys.
Pool reports with original analysis and yield data.
+68% of DeFi's TVL
Research reports on individual protocols at your fingertips. These amount to +80% of DeFi TVL.
Reports on individual assets, their risks and original explanations of how they work.
+90% of DeFi TVL
Blockchains that we have researched and risk-rated.
+95% of DeFi TVL
Most popular pools
High yields, lower risk and proven protocols. These were the most visited pools in 2022:
Pool | 30D Avg APY | Risk Rating | Yield Source |
~32% | B | Organic from trading fees | |
~10% | B | Organic from trading fees | |
~7% | B | Farming rewards accrued by the borrowers’ collateral | |
~3% | A | Liquidated ETH posted as collateral by LUSD borrowers | |
~8% | B | Trading fees between nETH<>ETH plus $NOTE incentives |
Most followed pools
Investors can keep a close eye on their investments by Following pools and subscribing to yield alerts. These were the most subscribed among Exponential users:
Pool | 30D Avg APY | Risk Rating | Yield Source |
~7% | B | Farming rewards accrued by the borrower’s collateral | |
~8% | A | $AAVE emissions | |
~0.7% | C | Organic from USDC<>USDT<>DAI trading fees | |
~10% | F | FRAX <> stablecoin trading fees, $CRV incentives | |
~27% | C | Trading fees, borrow fees and liquidated collateral from leveraged traders |
Most popular protocols
Doing your own research before depositing in a protocol is a must-do these days. A mix of blue chip, crypto-Twitter drama and emerging ones comprise the top 5 most visited protocol reports
Protocol | Risk Rating |
Best | |
Watch out | |
Best | |
Average | |
Watch out |
We launched our blog with posts written by ridiculously smart and good-looking people, a weekly email newsletter with amazing DeFi research and questionable puns, and a new podcast honoring our favorite DeFi users, Degen Responsibly.
Blogs
Exponential in the media
- Smart Contracts Are Riskier Than You Think - Pomp Podcast
- Not Boring Founders: Exponential - Not Boring Podcast
- Cindesk TV interview to our CEO - Yahoo Finance
It’s nearly here – investing on Exponential
In 2023, Accredited investors will be able to invest in DeFi liquidity pools across major chains directly on our custodial platform.
if you haven’t already so you don’t miss out.