As every tech sector searches for ways to integrate AI into its business operations, the blockchain industry has faced some false starts in implementing its capabilities. While there have been a handful of projects connecting the two sectors, red-hot AI developments have not generated the most fruitful results regarding crypto. One of the most exciting applications, however, involves using AI to help assess and consolidate the nuanced and ever-evolving risks that characterize crypto investment.
Following a positive DAO vote, Spool has onboarded Solity Network as its first external Risk Model Provider. As the first external Risk Model Provider on Spool, Solity Network uses a comprehensive methodology based on machine learning, AI, and real-time fundamental risk processing to boost how users can designate their investment risk appetites.
The addition serves Spool’s DeFi infrastructure which allows institutions and users to build customizable, risk-managed investment crypto products. When building a personalized DeFi protocol, or Smart Vault, Spool users select a risk model which then allocates funds and dictates investment activity within their portfolio based on an extensive set of vetted risk parameters.
“Expanding collaboration in DeFi is the best way for the industry to thrive, and we’re immensely proud to lead the charge by adding Solity Network as our first Risk Model Provider,” says Hendo Verbeek, Head of Risk of Spool DAO. “DeFi’s true value emerges from connecting the best innovations in the space to improve the user experience while building a robust and diverse industry, and this addition is only the beginning to widen user choice and continue connecting with other stellar projects.”
Spool users can now build a Smart Vault utilizing Solity Network’s extensive AI-powered risk framework, expanding the choice and flexibility that users have in automated risk management for their decentralized investments. Solity Network’s model creates a multi-level risk score for each protocol, creating a transparent risk assessment using six parameters:
Development Activity: This score consists of a few sub-elements and factors. These include developer contribution, engagement, code quality, code documentation, and dependency on individual contributors.
Social Activity: The model analyzes key social channels such as Telegram, Discord, and Reddit to create a score based on performance metrics. These include unique user accounts, user activity, message and post frequency, user sentiment, and other vital community indicators.
Security: Solity Network analyzes indicators such as smart contract deployment dates in combination with TVL, smart contract audit and auditor information, upgradability, static analyses, bounty size, whitepapers team data, hacks, and smart contract statistics.
Liquidity: The methodology for the liquidity score depends on the protocol type, making careful effort to differentiate between lending protocols, decentralized exchanges (DEXs), and yield aggregators.
- Lending protocols: This score takes the overall health factor of the protocol into account. This includes top wallets and assets, lending pool liquidity, total liquidity, daily volume, token price, collateral value, debt health, liquidity rate/depth, active borrowers and lenders, and unique addresses in the protocol.
- DEXs: Specifically accounts for the market efficiency of a DEX, underlying asset correlation, liquidity concentration, volume, and an assessment of TVL.
- Yield aggregators or optimizers: Analyzes account capitalization factors for the respective protocol
Decentralization: The decentralization score measures the number of tokens, token holders, tokens per wallet, wallet ages, network participation, and governance parameters in addition to distribution (e.g., Gini coefficient).
Tokenomics: The tokenomics score analyzes risks concerning token price manipulation, market positioning, block producers, circulation, value stability, utility, distribution, and liquidity.
“We’re thrilled to be the first Risk Model Provider added to Spool’s infrastructure and give the community a way to explore our risk assessment capabilities,” says Benedikt Eikmanns, Co-Founder and CEO of Solity Network. “Our goals to provide a powerful, transparent, and intelligent infrastructure for DeFi completely aligns with Spool’s ethos and operations, and we’re excited to see how its user base utilizes our risk model going forward.”
Risk Models added to Spool undergo stringent scrutiny by projects and individual specialists with years of combined expert-level knowledge, and can only be added to the platform after passing a DAO vote to ensure community approval. At the touch of a button, Spool’s user community gets access to unparalleled investment expertise, while Risk Model Providers are able to earn a performance fee for their contributions and knowledge. This encourages a thriving risk model roster that fosters a mutually beneficial investment relationship.
By opening the door for external Risk Model Providers, Spool broadens its capabilities to open up the world of DeFi and bring Smart Vault creators the maximum amount of choice possible when building their investment products. Additionally, external risk models continue Spool’s mission to build an accessible DeFi infrastructure that eliminates the complexity and unclear risk associated with decentralized investment.
