Gearbox DAO

Summary

GIP-15 mandated a 3-month engagement with RiskDAO. This engagement period ends at the end of November 2022, and this proposal suggests extending the engagement by an additional 9 more months, with the same engagement price.

Motivation

Setting the right risk-related parameters, most notably loan-to-value (LTV, aka collateral factor), is crucial for lending markets’ solvency and adoption. Aggressive parameters would encourage borrowers’ adoption at the expense of higher insolvency risk, and conservative parameters would do the opposite.

Gearbox has an in-house Risk Committee, however it is becoming best practice to engage with external risk assessment firms (e.g., see Aave) similarly to how external code auditors are engaged.

Further, the RiskDAO offers additional monitoring tools and simulation models w.r.t the tools the risk committee is offering.

Summary of the current engagement period

Gearbox dashboard by Risk DAO went live in less than a week after Gearbox mainnet deployment.

The dashboard recommends liquidation thresholds and also displays key indicators to explain how these recommendations were formed.

Some notable indicators are:

• Credit account composition
• Asset distribution and expected liquidations according to asset price
• Stablecoin monitoring widget

In addition, RiskDAO developed and implemented, per the GIP-15 decision, a mathematical model for stablecoin collaterals.

And proposed, in GIP-27, to introduce a sanity check to the LUSD price oracle implementation.

Future engagement

The engagement will continue to include the development and maintenance of the dashboard.

In addition, RiskDAO will continue to research topics that are of interest to the Gearbox community.

In particular, the community is interested in:

1. Investigate the implications and risk model of having balancer LP tokens as collateral.
2. Investigate the risk implications when deploying on L2s (which stem from the lower liquidity in those ecosystems).
3. Explore and consult on additional oracle vendors.

Engagement model

Risk DAO is a revenue-driven service DAO.

The pricing model is 33.3k USDC payment (quarterly) and 1,111,111 (quarterly) GEARs locked for 3 months and then linearly vested over 9 months (similar to other contributors).

The proposal is for an additional engagement of 3 quarters.

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Gearbox Dashboard by RiskDAO: https://gearbox.riskdao.org/

RiskRAO regular reports: https://gov.gearbox.fi/c/risk/