Hyperledger Global Forum 2022

DeFi has seen rapid development. With this rapid development comes reports of spectacular heists, scams and hacks. Rapid development and great returns come with risks. Without risk, there is no reward. The broader financial system has been dealing with this phenomenon for centuries, mostly through the practice of Risk Management.

This talk answers the question "Can such Risk management practices be adopted to DeFi?" Our answer is yes. We propose a framework and suggestions for a solution fusing familiar risk management proposals.

These include ways to deal with the vast amount of data, Value at Risk Methods (including governance risk), trading risk methods integrated and extended to the DeFi world through automated risk monitoring and mitigation. The surfacing of these risks and integration into trading systems on the edge (aka wallets) with a transparent scoring mechanism will result in wider acceptance of DeFi.
Drawing parallels with structures in Finance; the hacks that have happened, ideas for infrastructure, automation of scoring, division between the edge and the core and integration of such techniques into the trading and risk management of Web3:Yield Farms, DEXes, NTFs ...