Compound V3 Economic Audit Report

Rik Ghosh, Samrat Gupta, Arka Datta, Abhimanyu Nag and Sudipan Sinha
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Rik Ghosh: Chainrisk
Samrat Gupta: Chainrisk
Arka Datta: Chainrisk
Abhimanyu Nag: Chainrisk
Sudipan Sinha: Chainrisk

Papers from arXiv.org

Abstract: Compound Finance is a decentralized lending protocol that enables the secure and efficient borrowing and lending of cryptocurrencies, utilizing smart contracts and dynamic interest rates based on supply and demand to facilitate transactions. The protocol enables users to supply different crypto assets and accrue interest, while borrowers can avail themselves of loans secured by collateralized assets. Our collaboration with Compound Finance focuses on harnessing the power of the Chainrisk simulation engine to optimize risk parameters of the Compound V3 (Comet) protocol. This report delineates a comprehensive methodology aimed at calculating key risk metrics of the protocol. This optimization framework is pivotal for mitigating systemic risks and enhancing the overall stability of the protocol. By leveraging Chainrisk's Cloud Platform, we conduct millions of simulations to evaluate the protocol's Value at Risk (VaR) and Liquidations at Risk (LaR), ultimately providing recommendations for parameter adjustments.

Date: 2024-10
New Economics Papers: this item is included in nep-acc, nep-ban and nep-pay
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