Thread by @jack_clancy93

1/ This thread talks about the different risks DeFi platforms face and why me and a few others @ConsenSys have spent the last few months researching and drafting a risk assessment framework for DeFi platforms

2/ DeFi users have a lot of options. All lending protocols are not created equal. Comparing rates is hard and has many pitfalls. We wanted to provide users with an easier way to compare across different platforms.

3/ The cost of creating new financial products is trending towards 0. With great power, comes great responsibility. Legacy finance products that have been studied thoroughly by multiple independent parties still blow up. What happens when we have compounding smart contract risk?

4/ We couldn’t find a good solution to that question. So we set out to improve the way we think about, and more importantly, communicate risk to the DeFi public. The goal of this score is to *Empower DeFi users to make better financial decisions*

5/ The underlying methodology is fairly complex, but that doesn’t mean it can be simple for a user to understand. Even with a robust and validated methodology, this score can’t help the industry if it isn’t easily understood by the average DeFi user.

6/ This isn't a validated statistical model. This is an MVP we're releasing to solicit community feedback and engagement. There is still a lot of work to be done. Future improvements include:

* Scoring additional products
* DAO-ify the management of this scoring algorithm

7/ We're really excited about the future of DeFi. The parallel financial system is reaching escape velocity. This is a nascent space with lots of risk. We should attempt to quantify, communicate and mitigate as much as possible.

8/ Risk people should be excited about how transparent and auditable these systems are. If you want to help shape the future of risk management, get involved!

Read more here: github.com/ConsenSys/defi…

Also, come to my talk @EFDevcon if you’re interested in learning more!