DeFi Pulse Now Grades Decentralized Finance Risks

Crypto investors have a new reference point for evaluating decentralized finance projects, thanks to a new risk indicator from DeFi Pulse.

DeFi Pulse announced on Tuesday the release of the DeFi Pulse Economic Safety Grade, developed in partnership with blockchain simulation platform Gauntlet Networks, to give users a way to better understand the risks they’re taking when locking value in DeFi protocols. 

The Economic Safety Grade is calculated on a scale from 0 to 100 and measures a protocol’s risk of insolvency, with higher scores indicating a safer investment. It’s another sign of an industry working to break into the mainstream and become more accessible to novice users.

DeFi, short for decentralized finance, is an emerging industry based on a variety of blockchain-based protocols that use code known as smart contracts to provide financial services like loans or interest. Instead of relying on centralized third-parties like traditional banks, DeFi protocols use value contributed by users in the form of cryptocurrency deposits to provide financial services; users receive interest income in return.

DeFi Pulse has become one of the leading indicators for tracking the growth of DeFi and identifying quality protocols, using blockchain data to measure the total amount of value locked (TVL) in DeFi protocols and providing basic information about projects’ functionality.

The DeFi Pulse Economic Safety Grade measures the risk of protocols becoming insolvent—that is, when the value of contributed collateral is less than the total value of all loans that have been issued. If a protocol becomes insolvent, users that have contributed cryptocurrency to be used by the project are at risk of getting back less crypto then they put in, or, in a worst-case scenario, none at all. 

Grades have been assigned to two DeFi projects so far, lending services Compound and Aave, which earned a 91% and a 95%, respectively. Scores are updated in real time based on potential price movements and borrowing patterns.

Aave Raises $25 Million to Bring DeFi to Institutions

DeFi is still a young industry, having only recently caught the attention of crypto enthusiasts—it took nearly three years for TVL in DeFi to gather its first billion, which it hit on June 2020, but less than four months to go from $1 billion to $10 billion

The next wave of growth will likely rely on drawing in users with little or no experience with crypto. If so, the DeFi Pulse Economic Safety Grade could be a valuable tool in helping those users stay safe, invest wisely, and stick around for the long term.

Compound Introduces Autonomous Proposals for Delegated Governance

Compound – the leading US lending protocol – has launched Compound Autonomous Proposals (CAPs).


Autonomous Proposals are a new type of smart contract allowing users with at least 100 COMP tokens to submit a governance draft. When 100,000 COMP is delegated to the proposal address, a function is called which triggers a formal governance vote.

Given the current threshold of 100,000 COMP needed to create a proposal, CAPs allow smaller holders to make proposals while mitigating the risk of spam due to a 1% of tokens needing to be delegated towards the vote. While CAP tokens are locked during the delegation period,  proposers can either wait for the proposal to pass or terminate the proposal, ending the CAP and returning the COMP to the creator’s wallet.

For perspective, the change to 100 COMP for a CAP is a reduction of 1/1000 of tokens required. In US dollars, that is equivalent of 180,000,000 USD for a formal governance proposal as opposed to 18,000 USD needed to start a CAP.

The launch of CAP’s was kicked off by a vote to set the Pause Guardian to a 4-of-6 community multisig, signalling the first of many community-oriented proposals to further decentralize control of a leading DeFi protocol.

Alongside CAPs, Compound also released documentation on the allocation of the 775,000 COMP set aside for future incentives. With 500,000 COMP allocated to Coinbase Earn campaigns, the remaining 225,000 will be allocated to a community-owned Resovoir contract for future governance incentives.


With the launch of CAP alongside a reduced COMP emission schedule, it’s clear that Compound is taking a strong stance on progressive governance. With the ability for smaller tokenholders to be more active in governance, we expect Compound’s delegation feature to see a lot more use in the coming months.

In the meantime, be sure to stay up with Compound by following them on Twitter.

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