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A taxonomy to evaluate risk in DeFi protocols.
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Understanding risk in DeFi requires analysis across different dimensions. Obviously, people associate risk with technical exploits given that those are very binary events. However, technical vulnerabilities are far from providing a complete picture of the risks faced when interacting with a DeFi protocol.
Risk in DeFi should be seen across two main dimensions:
I. Protocol Lifecycle: From development time to production vulnerabilities.
II. Functional: From technical to governance to the economic behavior of the protocol.
For each one of those areas, there are different solutions that can help mitigate risk in DeFi protocols.
Breaking down the risk dimensions into more granular levels give us a perspective of the different risk vectors across the lifecycle of DeFi protocols as well as mitigation strategies.
The previous taaxonomy is far from being exhaustive but provides a solid baseline to understand the different risk dimensions in DeFi protocols.
DeFi Risk in Different Levels was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
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