5 Top Takeaways: Quantifying Opportunities and Risks In Liquidity Protocols

Earlier this month, Amberdata Co-Founder and CEO, Shawn Douglass, participated in a Coindesk webinar titled "Quantifying Opportunities and Risks in Liquidity Protocols." Get the 5 key takeaways and watch the full video recording below!

Shawn Douglass (CEO and Co-Founder of Amberdata) was joined by Tarun Chitra (Founder and CEO of Gauntlet), Alexandre Elkrief (Head of LedgerPrime Labs) and Darius Sit (Founder and CIO of QCP Capital) for an in-depth discussion on:

• Data-driven approaches to analyzing liquidity protocol risk
• Quantitative strategies for enhancing yield/achieving superior returns
• Decreasing volatility in returns and leveraging stablecoins as collateral

Here are the top 5 takeaways:

1. DeFi is a radically transparent asset class that allows you to have visibility and build telemetry into all the mechanisms that incentivize behavior. You can view behavior from the perspective of the participant (the wallet view) as well as from the perspective of specific pools/assets and protocols. The governance perspective is also becoming critical. It’s important to understand protocols in the context of these lenses.
2. Losses are often made on the smallest of details. Identify the idiosyncratic risks and identify the unique features of each protocol. The devil is in the details. Do not assume that each segment in every protocol is the same.
3. Most systemic risk comes from bespoke derivatives that are unique to crypto and don't have redemption mechanisms that offer you recourse. That’s really the biggest source of risk right now - recursive borrowing and leverage.
4. It’s important to know whether you are sharing the liquidity pool with 10,000 small depositors or with five large whales, and how the economic balance of the pool might change if one of them pulls out.
5. DeFi is creating a whole category of financial products. Crypto will, over time, just become finance.

Coindesk also provided their top highlights and excerpts from the webinar in the article Trading DeFi: What Traders Need to Know. A recording of the full discussion is available here:

Download our ebook, "The Decentralized Finance (DeFi) Primer", to learn more about DeFi and why institutions need a data partner like Amberdata to take advantage of this fast-growing segment of the digital asset space.