TokenBrice, The DeFi Collective: Genuine DeFi: The Uncelebrated, Yet Critical, Evaluation Process

[Music] so uh welcome hello I'm here today to talk about um decentralization in defi essentially and um the various Solutions we have and especially what I'm doing now at my level with some colleagues at the defi Collective so you might not have seen recently uh even not so recently there is a massive alignment problem in defi in the sense that uh very few projects are actually properly decentralized immutable and uh Unstoppable what would qualify as real defi most of what we have is actually uh in a range between it takes a few minutes to someone experience to uh actually seriously attack the protocol to uh there are serious centralization vectors and um that could be problem in the future because of that so for those who follow just um a few days ago yesterday actually radiant protocol got hacked out of $50 million because of uh essentially un unmitigated dependency on a multic so that's the kind of uh hack that we shouldn't even see happening because protocol shouldn't even need to rely on Multi in the first place but anyway that's that's defi you have a bunch of actors that are motivated by profit mainly you have a complex space and what it leads to very often is essentially ausc so projects Mis representing their actual decentralization level to mislead investors into confidence and using their protocol so uh a year ago we launched a collective and that was uh essentially a core Mission we wanted to address uh to uh essentially the the the the goal of the collective to put it simply is how do we go from defi where maybe 10 protocol can be properly called defi to a defi where we have hundred or thousands of such protocols and so we entertaining essentially any Endeavor that could result into more protocol being built maximally decentralized um so at a high level uh H works it's an association nonprofit Association established in Switzerland uh defi native so we use defi we do everything on chain completely transparent we publish monthly report trimester report yearly report all wallets are public everybody can audit what we do completely self-sufficient we have our own assets or assets are sufficient to cover all expenses and generate a large premium that can be then compounded to support further protocol and um the other thing is it's completely self-appointed so nobody hires the collective the collective simply hire itself on the protocol that are the most resilient the most interesting the most critical for the future of the space um so at a high level this is essentially how it goes we have the treasury activity uh supporting projects with liquidity strategy using the protocol directly um we also advise them in toomics liquidity crash strategy we have a another dimension that is the education essentially just like what I'm doing today explaining to you the goals and the the challenges regarding decentralization in Defi and probably what you will be most interested into or um upcoming release in the next weeks which is defi scan and the um the high level for it is essentially picture L2 beit but for the decentralization stages of protocols um I'll get into def skan in just a minute uh Collective just turn one years old so I wanted to share some some figure to give you a sense of it uh so far there's been over 10 project Pro we supported directly through advising treasury donations or whatsoever over the first year of activity we had a net earning of about $450k doll and uh 78% of surplus that means essentially only 22% of what we produce in revenue is necessary for the structure to cover all its expenses the rest is compounded to further support defi um the way it's done is essentially harnessing uh what we call liquidity driving tokens so maybe you're familiar with the vcv model there are others model like this but essentially you control token such as V or V you can direct incentive to some liquidity pairs so that's one way to support liquidity and as you do so you get exposure to the trading fees on those pair and that's one of the main uh Revenue sources for the collective so out of these um earnings of 450k I presented you earlier here is the revenues so you get an idea of where it comes from but essentially Valu position liquidity providing on layer one liquidity providing on layer twos and on the right side the the purple and the gray is what is derived from the uh liquidity driving positions in terms of expenses um just to give you a quick overview big post of expenses for us is uh posting bribes on decentral decentralized Exchange to attract votes to the pairs we trying to grow liquidity for and of course contributors we have six contributors uh so that's that's a decent spending and about 4% still of all our expenses are gas uh 10k of gas burn last year um luckily for us there's been thenon update and so on layer to it's much slower so our selling you returning one years old and uh we have quite a few things planned for this there is an an anniversary nft you can meet if you want to support the collective uh we're publishing our yearly financial report just today you'll find it on the def collective.org website and the um most interesting part I guess the most anticipated is defi scan uh coming next week and along with it will come uh what we call a review to earn campaign where essentially we're putting uh to start with 10,000 uh dollar of stable coin of own assets and incentivize protocol review submission by users but let's have a quick look at at def scan so I was telling you it's essentially like an L2 bit for decentralization stage so it would look like this have valious protocol and uh uh their decentralization status essentially the way we um we do it is essentially it's three uh sub products let's say first there is a framework to assess and review decentralizations of protocol then there is a set of tools and resources that we built that are essentially for instance what we call the the permission scanner you can drop any contract in there and it will analyze all the permissions who can update what and return it to you and there is essentially the final product the um def scan website where you will see all the uh the ranking and the details for each um so the framework is in five Dimensions similar again to L2 bit but adjusted for protocol review so we look at the chain we look at the upgradeability of the protocol the autonomy the exit window and the accessibility I will show to you in in practice I guess I would be um clearer but before we even look at a protocol we have some prerequisite that uh this decent amount of protocol don't even meet so they don't even qualify as at stage zero they are na uh and and those prerequisites are pretty basic you must be on chain there must be no centralized custody in your protocol you must have public documentation your code must be verified and um the the code must be open source or at least Source available so if you don't have this you can't even be reviewed because we can't use the tool to review you so you get stage nothing essentially so that's CNA and then you have stage zero which is essentially reviewed but scoring low on on most metrics um stage one and stage two so starting at a stage one you can have a protocol that uh is more or less resilient even if it still has some unmitigated dependency or centralization vector stage two is on the other end essentially a perfectly clean protocol where uh the only way you could lose your money with search protocol is for the smart contract to have a failure so in practice this is how it looks like so I'm taking here liquid wiely recognized as one of the cleanest protocol there is on Main net and most beautifully engineered and for a reason so essentially if we go through the five Dimensions quickly so you understand uh on the chain liqui is on ACM main net main net is getting uh the best grade in our chain rating along with stage two rups so that's a green high score upgradeability liquidity is purely immutable code so there is no worries about immigr upgradability height score exit window well you can change the protocol anyway so who cares there is no need for exit window high score accessibility liquid is widely recognized for his model where essentially they incentivize third party to host front end and you know have about 40 different ways to access a front end for the liquid protocol so top of the class here and autonomy autonomy we look at the dependency to other protocols to other services or product and especially we look at is there any one product that if it fails it could cause damage on the whole protocol in there the uh um critical point essentially for protocol like liquid is the Oracle but uh they do have Oracle redundancy and logic to switch between the Oracle so they are autonomous in the sense that they can resist the failure of one of the Oracle uh another protocol maybe you know of vome aerodome that would be similar rating but just to show you that overall uh you know even if it's called a low in the current framework it's a pretty clean low essentially and I'm going to go in details into what that mean so chain level there are on optimism that's a stage one roll up L2 beit so that gets a medium rating in know in know in a perspective when optimism goes to stage two rollup this will be upgraded to Green uh upgradability uh there are some non core function non-critical functions that can evolve but the core of the protocol which is a DEX so providing liquidity swapping cannot change so that's pretty clean there accessibility pretty similar to liquidity they have a decent amount of frontends about six or seven at least so uh it ensure that the protocol will remain accessible even if there is uh um some limitations problem to access one front end autonomy um they are essentially pretty much self-sufficient they don't rely on any external product or service or anything to function so they get a green here too on the exit window is uh where the the damage layer is currently because essentially they have this Governor contract that can instantly push changes to reward Logic for instance or key reward goes to to a to a parle so because there is no exit window since the changes are instant that gets a low grade in in all in all scoring yeah can can I give you the detail on the exit window but essentially every Dimension is detail like this in a very sorrow framework so right now I'm giving you like almost just a result and a quick explanation of what it is but the um the Merit of the Endeavor is that you have this high level overview with you know oh there is a lot of green here that's good oh no too much red for me but then you can actually go in details and every single item is sourced with link to the contracts or to anything relevant to understand why it got that great yeah just to give you maybe a bit more perspective on the collective uh it's an association Carri by uh three board members myself included uh nil that is more on the technical side and FL that is more on the legal side because we an association in Switzerland so we do have some concern there and uh about five contributors currently uh that you have here so we have a treasury team uh along with lud and then um marketing and and Community Management with uh space CPS and stard and all the protocol reviewer team uh cooking crypto and sasus on the on the right side of the screen so about eight people involved total uh I was telling you uh we celebrating our anniversary we have a very cool nft you can mean for 001 e and optimism if you want to support or work it's uh welcome to do so but again we self sufficient so we don't need it to survive it's just to scale up our activity and come back to you on stage next year maybe presenting you the database with I don't know 100 200 300 protocols exhaustively reviewed and a defi scin that would be of much bigger grade so yeah thanks you all and I don't know who am I on time uh maybe I can take some question oh we have three minutes for questions if you have question all right well I'm around anyway so if you want to come chat with me about the collective if you have a protocol you're confident in its decentralization and you want to have it reviewed on Def scan reach out um and yeah yeah I'll be around the conference here oh well go for it uh so as someone who used to work on in the defi space um uh I want to thank you for setting uh working on this kind of quality Benchmark uh because uh in the past years uh the only way as a user you can get to know what whether there are any problems with some defi protocols is just basically look on crypto Twitter and see if anyone is complaining loudly about our gradability and and so on and so and so forth uh I want to ask you uh if you can expand on the process for uh coming up with the uh benchmark scores like uh um what how is the team involved in uh setting a score for all the different metrics that you have so uh we have essentially for every item exhaustive checklist of you know every single Salam item and a special scoring for each to determine if they go into low medium or high regarding how the teams are involved right now they are essentially not involved in the first batch of protocol we reviewed them ourselves we are reaching out to the team to give them a chance to review provide feedbacks and whatsoever and the vision for the long term is we want the team to self review essentially and we will audit their own self- review and then validate it and put it on on the U on the website so the vision is that you know you will want to be part of this website of this database because if you doing things properly you want to advertise how decentralized you are um on the other hand and where it's it's getting tricky and that's where we putting um the sensitization I was talking about the $10,000 we putting for protocol reviews is you have an alignment problem where a major protocol that is not decentralized do not want def scale to show how not decentralized they are with receipts and proof so they will not come to self- review we have to essentially Force review them without without the approval without the support and they're probably going to trash us on social networks on which weish that but we're still going to do it because the goal is to have the top 100 of defi in that database by the end of the next year essentially uh thanks and second question uh can you expand more about the upgradability uh in your opinion is just is it just a black and white score if you're upgradeable uh you You're vulnerable or it's more than that no no it's not uh it's not black and white uh it's uh it's a matter of essentially what can you upgrade so I don't know if you remember the Vel Drome review they got a medium on upgradeability because there is upgradability but it doesn't affect the core function of the protocol so this gets you a medium uh if there were for instance capacity to upgrade the swap or liquidity providing function they would be getting a low because now you have upgradeability affecting core function of the protocol uh so it's really a matter of How deep the upgrades can be and are they touching core functions of the protocol and um and yeah uh the process around the upgrade how decentralize is because of course you know we don't want to penalize I don't know protocol like Avi where pretty much everything can change on AI they it's totally upgradeable you can add remove collateral put the collateral uh dep ceiling to to a billion in one transaction if you want so uh yeah it's a balance of each and if you're interested in the framework it's getting live next week so follow defi col Ive on Twitter def collective.org you'll find the framework here and and you can see where your favorite protocols will uh Place great thanks thanks [Music] oh