ARC: Adding Credmark to Aave v3 Governance permitlist

With Aave v3, Credmark would like to propose that our DAO be a registered entity for Aave v3 Governance, specifically as it pertains to financial risk. In the v3 proposal, this is referred to as the “permitlist”.

Our latest research explores the probability of insolvency for Aave, Value at Risk given market volatiltiy AND includes quantifiable mechanisms that Aave has in place to make lenders whole in the case of a market shock. We think this is the most comprehensive risk analysis in Defi that is available to the public.

This risk research can be viewed here: Aave and Compound DeFi Protocols - Risk Library


@mostarz93 - thanks for you willingness!

What other protocols are you analyzing for risk vulnerabilities? What are your qualifications bedsides the library attached above? What is the composition and background of your team?

Look forward to learning more about Credmark.

Hey @fig Thanks for the questions.

To be clear, we are looking to add Credmark as a registered entity for Aave v3 Governance.
I’ve put some background on our team and some of the other protocols we’re looking into below. A significant way Credmark would be impactful members of Aave v3 Governance is by establishing standards for financial risk to the protocol.

Let’s take some of the research we’ve done on Liquidity risk as an example:

We used a Liquidity Coverage Ratio (LCR) assessment to compare Aave & Compound’s ability to maintain a liquid profile in the event of a flash loan attack or other adversarial conditions. Our assessment compared the funds in a Safety Module to potential outstanding cash outflows. As part of the Risk DAO, Credmark would be able to help establish standards around where things like LCR should be maintained.
Of course, Credmark is a Risk and Data project. As such, we could provide real time data and tooling that can drive decision making around the necessary level of safety module to be able to absorb potential risks, or guidance on governance related decisions by the DAO. Any robust risk comparison will have to include a number of risk classes- but the LCR should give you an example of some of the things our team can do.

We’ve done extensive research on the following:
Aave, Compound, Uniswap v3, CREAM Finance, and Idle Finance.

You can find much of this in our newly minted risk library

We are in the process of researching lenders, yield aggregators, AMM’s and stablecoins

Previous to this, we spent 2 years analyzing the crypto credit space in our quarterly Crypto Credit Report: Media and Crypto Reports | CREDMARK

Our Head of Risk Solutions, Asan Tulemis, has over 15 years of experience as an FX trader, Risk Manager and Quant for massive financial institutions, that is underpinned by Ph.d in Applied Mathematics.

As for the founders, I (Momin Ahmad) was the lead author and researcher of the CCR, Neil Zumwalde has worked in automated distributed systems, and Paul Murphy has been a founder for a number of tech and finance startups since the 90’s.


@fig We’ve formed partnerships with both Steady State Finance and Both projects will be leveraging our insights to inform their own products. Steady State will be using our insights to price insurance that protocols can purchase and will leverage us to help them understand the risks associated with various pools on DEX’s.

We think that including us into Aave’s governance permit list can only reinforce the considerable effort that has been put into securing their money markets.

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