Exponential’s 2022 Wrapped

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.

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:

: We rated Raydium with a “Watch Out” score due to an anonymous team and lack of experienced auditors. The protocol 

 after a “private key compromise” withdrew funds from various pools.

 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 

 for liquidity providers instead of generating yield,

 Juicy rates have lured in investors but we have expressed healthy skepticism. All uncollateralized 

 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 

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.

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 

 on DeFiChain DEX paired with DUSD are rated D or F due to this exposure. Since 

, 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 😭

: Both currently rated as “Best” but the 

 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 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 

. 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.

High yields, lower risk and proven protocols. These were the most visited pools in 2022:

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:

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

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, 

Take the mystery out of DeFi with Exponential

How Exponential is solving DeFi’s biggest problem – risk

How to keep calm and invest during a crypto bear market: 

Smart Contracts Are Riskier Than You Think - 

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.