Grant proposal - Euler risk tooling

Euler Grant Proposals RFC
1

Summary

We propose building multiple simulation and risk monitoring tools for the Euler DAO. These tools will allow anyone to validate the robustness of collateral and borrow factors, simplify collateral asset onboarding analyses, and enable protocol-wide simulations.

We are asking for a $80,000 grant from the Euler DAO grant program to build these simulation tools.

Motivation

Lending protocols like Euler need to constantly monitor their risk exposure as market conditions change. We want to provide the Euler DAO with custom tooling to more easily and more transparently monitor risk vectors.

We believe that allowing users to easily simulate scenarios and regularly backtest collateral parameters will be extremely useful to the DAO. We believe these tools will enable community members to more actively participate in the DAO’s risk management decisions while making them more transparent.

Background

Our team has completed multiple analytics and tooling projects for well-known DeFi protocols such as Aave, dYdX, Instadapp, Uniswap, and Notional. For example here a some of the tools we have built:

We have also collaborated with the Euler core team over the past few months by contributing to the development of the Euler subgraph, the Euler Dune dashboard, and minor parts of the Euler UI. Our knowledge of DeFi lending protocols and of Euler specifically will be key in allowing us to deliver useful tools to the DAO.

Specification

We propose to build the following risk and monitoring tools for the Euler DAO:

System-wide simulation tools

  • Simulate the impacts of changes in asset prices for one or all Euler accounts. The simulation will output the simulated account values, LTV, and healthscores of all Euler accounts.
  • Simulate the impacts of changes in collateral or borrow factors to see how many accounts would be at risk of liquidation given certain parameter changes.
  • Simulate the protocol system-wide Value at Risk (VaR) based on custom scenarios (95%, 99% VaR).
  • Monitor the cumulative Debt at Risk for all collateral assets.
  • Monitor account sizes by liquidation prices for all collateral assets.

Liquidation profitability and collateral factor backtesting tools

  • Simulate the historical liquidation profitability of a simulated account based on historical data (gas prices, spot prices, historical on-chain liquidity).
  • Assess how quickly the account would have been profitable to liquidate given its size and market conditions. Showcase the historical worst time to liquidation.
  • Run a sensitivity analysis looking at how much bad debt the protocol would have accrued for a given set of accounts using different borrow and collateral factors.

Collateral onboarding tools

  • Analyze the historical on-chain liquidity of new potential collateral assets. The tool will output an analysis of historical slippage on major DEXes.
  • Analyze the historical on-chain volatility of new potential collateral assets. The tool will output an analysis of historical volatility and maximum drawdown measures for given periods of time.
  • Run a borrow and collateral factor backtesting analysis of new potential collateral assets.

Development budget and timeline

We estimate the development cost of building and hosting these tools at $80K. We propose that the DAO funds 25% of the grant upfront and 75% upon delivery of the tools.

We estimate the total development time at 8-12 weeks from the time of the initial grant approval. This includes backend work, design, UI, and testing.

We propose setting a bi-weekly call with key members of the Euler core team to update them on our progress and get additional feedback.

Voting

  • Yes - Approve and fund the development of a system-wide simulation tool, collateral factor backtesting tool, and of a collateral onboarding tool by the shippooor team.
  • No - Vote against the funding and development of a system-wide simulation tool, collateral factor backtesting tool, and of a collateral onboarding tool by the shippooor team.

We are looking to hear feedback from the community before moving this proposal to a snapshot vote.

2 Likes
2

Given the previous work done by Shippooor (Euler Dune Dashboard), I fully support this idea. To me, it’s crucial that this tooling allows any member of the community to backtest and simulate onboarding of new collateral assets, liquidations etc. so that the DAO can function without core members of Euler Labs team.

As long as that’s the case (and I believe it is), I am behind this proposal.

2 Likes
3

I will be voting against this proposal based on the provided info; I believe 80k is too much.

4

Well-written proposal. Always in support of technical contributions like this.

1 Like
5

I’m supportive here, broadly. At the same time, I would suggest you detailing the structure of expenses, like salary of the team, platform (if any is going to be used for building tools) fees, etc. I suppose, that clarity on that would help to avoid questions on the amount requested.

One more question regarding your plans to deliver the tools. Seems that you plan to build quite some, so are u going to present everything at once or one by one or group by group? If group by group for example, than I would suggest changing the funding scheme. Instead of getting 75% at the end of the work, I would prefer u to be fund on a more regularly basis, like after one group of tools is presented, u get 25% more and so on. Development of 8-12 seem quite a long time for the community to wait the result, so isnt it better to present results to the community more regularly and regularly receive more funds?

6

Hey Raslambek thanks for the feedback. Totally agree that more clarity is always good. Approximately 70% of the funding will go towards initial development time. We are building a custom back-end that recreates how the protocol functions to enable granular simulations as well as a custom UI which requires a lot of groundwork. The grant will also cover hosting costs required for high-performance simulations. These costs include AWS, a few licenses, and eventually subgraph calls. The grant will also cover for upgrades and fixes over time.

Regarding the delivery of tools, we are definitely willing to deliver groups of tools on a more frequent basis and present them to the community via walkthrough tutorials and detailed blog posts. Engaging with the community and gathering feedback is our top priority. As previously stated we will also meet frequently with the Euler core team for them to keep track of our progress. This will make the grant more milestone based.

Thank you very much for your feeback and support

1 Like
7

Here is the revised version of our proposal based on the comments received. The proposal will go through a snapshot vote in the upcoming days.

Summary

We propose building multiple simulation and risk monitoring tools for the Euler DAO. These tools will allow anyone to validate the robustness of collateral and borrow factors, simplify collateral asset onboarding analyses, and enable protocol-wide simulations.

We are asking for a $80,000 grant from the Euler DAO grant program to build these simulation tools.

Motivation

Lending protocols like Euler need to constantly monitor their risk exposure as market conditions change. We want to provide the Euler DAO with custom tooling to more easily and more transparently monitor risk vectors.

We believe that allowing users to easily simulate scenarios and regularly backtest collateral parameters will be extremely useful to the DAO. We believe these tools will enable community members to more actively participate in the DAO’s risk management decisions while making them more transparent.

Background

Our team has completed multiple analytics and tooling projects for well-known DeFi protocols such as Aave, dYdX, Instadapp, Uniswap, and Notional. For example here a some of the tools we have built:

We have also collaborated with the Euler core team over the past few months by contributing to the development of the Euler subgraph, the Euler Dune dashboard, and minor parts of the Euler UI. Our knowledge of DeFi lending protocols and of Euler specifically will be key in allowing us to deliver useful tools to the DAO.

Specification

We propose to build the following risk and monitoring tools for the Euler DAO:

System-wide simulation tools

  • Simulate the impacts of changes in asset prices for one or all Euler accounts. The simulation will output the simulated account values, LTV, and healthscores of all Euler accounts.
  • Simulate the impacts of changes in collateral or borrow factors to see how many accounts would be at risk of liquidation given certain parameter changes.
  • Simulate the protocol system-wide Value at Risk (VaR) based on custom scenarios (95%, 99% VaR).
  • Monitor the cumulative Debt at Risk for all collateral assets.
  • Monitor account sizes by liquidation prices for all collateral assets.

Liquidation profitability and collateral factor backtesting tools

  • Simulate the historical liquidation profitability of a simulated account based on historical data (gas prices, spot prices, historical on-chain liquidity).
  • Assess how quickly the account would have been profitable to liquidate given its size and market conditions. Showcase the historical worst time to liquidation.
  • Run a sensitivity analysis looking at how much bad debt the protocol would have accrued for a given set of accounts using different borrow and collateral factors.

Collateral onboarding tools

  • Analyze the historical on-chain liquidity of new potential collateral assets. The tool will output an analysis of historical slippage on major DEXes.
  • Analyze the historical on-chain volatility of new potential collateral assets. The tool will output an analysis of historical volatility and maximum drawdown measures for given periods of time.
  • Run a borrow and collateral factor backtesting analysis of new potential collateral assets.

Development budget and timeline

We estimate the development cost of building and hosting these tools at $80K. We propose that the DAO funds 25% of the grant upfront and 25% upon delivery of each group of tools mentioned in this post. Upon the delivery of each group of tools, we will present them to the community either via a walkthrough tutorial or detailed blog posts and gather feedback.

Approximately 70% of the funding will go towards initial development time. We are building a custom back-end that recreates how the protocol functions to enable granular simulations as well as a custom UI which requires a lot of groundwork. The grant will also cover hosting costs required for high-performance simulations. These costs include AWS, a few licenses, and eventually subgraph calls. The grant will also cover for upgrades and fixes over time.

We estimate the total development time at 8-12 weeks from the time of the initial grant approval. This includes backend work, design, UI, and testing.

We propose setting a bi-weekly call with key members of the Euler core team to update them on our progress and get additional feedback.

Voting

  • Yes - Approve and fund the development of a system-wide simulation tool, collateral factor backtesting tool, and of a collateral onboarding tool by the shippooor team.
  • No - Vote against the funding and development of a system-wide simulation tool, collateral factor backtesting tool, and of a collateral onboarding tool by the shippooor team.
8

  • “Approximately 70% of the funding will go towards initial development time.”

  • “We estimate the total development time at 8-12 weeks from the time of the initial grant approval”

$80 000,00 Total Funds Needed
$56 000,00 Approximately 70% of the funding will go towards initial development time
$18 666,67 8-12 weeks from the time of the initial grant approval → 2-3 Months

Shippooor is asking for 18,666$ for monthly compensation.

How large is your team, and where is your team based?

9

Hey @Vitali, we are a team of 3 engineers and will be working full time on this.

While the price tag might seem steep, this piece of software comes with significant engineering challenges and infrastructure costs. The goal is to abstract all of the technical expertise currently necessary to be able to understand and analyze the protocol’s risk into a user-friendly website that will allow the community to take better decisions as a whole. On the technical side, no data is currently available on an API so we will need to store all of the protocol historical data and update it in real-time, with precision, while allowing users to edit and play with asset prices and governance parameters. A deep understanding of the protocol is needed in order to build these features.

10

Thanks, I appreciate the clarification.

Makes more sense now.

1 Like
11

Quick update on our end as we approach the end of the year. We have been heads down building for the last few months. So far we have completed the following:

  • Build the back-end infrastructure
  • Index on-chain data
  • Re-write the Euler contract logic for risk simulation purposes
  • Build the UI

We will start accepting beta users in the coming weeks. If any of you want to get early access to the platform and test it out you can schedule a 15 min user interview here. We’d really like to get your feedback.

We’ll post additional updates in the coming weeks.

Happy Eulerdays to all!

3 Likes
14

We just published a blog post covering everything that we built as part of this grant.

All of the features are now available at https://warden.finance/

We hope this new tooling will improve the robustness of the Euler protocol and enable community members to actively participate in risk management decisions.

Again thanks to the Euler DAO for the grant and thanks to the Euler core team for their support throughout the completion of this grant.

2 Likes