Risk Analysis
In addition to the details above shared on the FileCoin protocol, it’s important to note 8 audits have been conducted to cover the different aspects.
The network is governed by the Filecoin Foundation funded by 5% of the supply with a 6 year vesting. Protocol Labs leads the development funded by 15% of the supply also vested. 70% of the 2 million FIL supply form the block rewards incentives as highlighted in the cryptoeconomics documentation.
Filecoin market has grown fast quickly reaching a wide audience and great market metrics with good liquidity.
The overall risk level of FIL is B which would make it fit for listing however it needs an ERC wrapper.
RenFIL
RenFIL is a tokenized representation of Filecoin on the Ethereum blockchain offered by RenVM decentralised custody. It is an ERC-20 backed 1:1 with native FIL locked in RenVM. Darknodes power the network, with the need to stake REN that can be slashed when the Darknode is responsible for loss of assets. For security reasons RenVM can adjust the fees to try and keep the ratio of bonded value to locked assets value 3 to 1 implying circulating supply of renAssets is affected by participation in RenVM and the REN bonded value.
The analysis below focuses on the risks of RenFIL mitigated by the market risks of FIL.
RenVM is a byzantine fault-tolerant network that is able to securely in a decentralized manner do ECDSA threshold key generation and signing via sMPC, which allows RenVM to securely manage private keys of different assets like Bitcoin and Filecoin, and wrap these assets on smart-contract chains. Since launch, RenVM has processed around $1.5B in total volume of Bitcoin, Filecoin, Zcash, Bitcoin cash going to and from Ethereum. The smart contract risks of RenFIL are mitigated by those of RenBTC which has been battle tested by the markets.
Technically, renFIL is a proxied token standard ERC with some features on top:
- Mechanism of exchange rate (similar to Aave slashing)
- Permit for approvals
- Recovery of other tokens sent to the contract
RenFIL Counterparty Risk: C
There is a proxy admin which can update all the logic of the contract with a 7 days timelock controller by a multisig, controlled by the team. Even with 7 days, it may be impossible to mitigate the consequences of a contract upgrade with minting for example.
Furthermore there is an EOA (Externally Owned Account) with permissions to mint, burn, change the exchange rate and decide which tokens sent by mistake to the renFIL contract are recoverable.
This results in the capability to burn tokens of a particular address (potentially the ones contained in aToken) and the change of the implementation under the proxy.
RenFIL Market Risk: B (based on FIL)
RenFIL market capitalisation is unknown with very little liquidity in the markets. The redemption process is permissionless enabling smooth liquidations into the liquidity of FIL.
Risk Parameters
Given the centralisation of RenFIL it can only be listed as borrow asset
Reserve Factor 35%
Variable Interest Rate Model
UOptimal 80% (since not a collateral)
R_0 0%
R_s1 7%
R_s2 300%
