Ethereum Assets

Risk Analysis per Asset

Last update: 06/06/2023

Stablecoins

USDC

USDC is primarily promoted by Coinbase and supported by the CENTRE consortium. Together with DAI, it has been the most used stablecoin in the DeFi ecosystem following a strong push from Coinbase who provides liquidity to projects.

USDC Smart contract Risk: A

USDC is the native currency of Ethereum blockchain. USDC on Polygon is the bridged version of USDC on Ethereum. USDC has only been active since September 2018. USDC has generated more than 38.1M transactions.

USDC Counterparty Risk: A

As it’s backed by real US dollars as well as other high quality reserve assets (since recently, USDC is centralised. The technology to mint new USDC and hold the backing USD value is based on a legal framework. It is currently maintained by the CENTRE consortium which is a trusted entity in the ecosystem and audited monthly by Grant Thornton. Furthermore, USDC is the first regulated cryptocurrency bringing a lot of legitimacy to the space. Still, the infrastructure is based on the Ethereum blockchain where regulators have little power.

USDC Market Risk: B+

USDC on Polygon has a $44.3B market cap, one of the highest market cap and trading volume of erc-20 tokens. Furthermore the price is pegged to USD. For this reason we consider the risks of USDC mitigate by USD.

RAI

RAI Smart contract Risk: C+

The Reflexer protocol and its stable asset RAI are permissionless, and aims to be “governance-minimized” in the future. The way RAI are minted/burned works around a “Safe”. In order to mint RAI, you must open a Safe. RAI will be burned by the repayment of the debt. RAI has generated more than 111k transactions.

RAI Counterparty Risk: C+

The process to mint RAI is permissionless and aims to be “governance-minimized” in the future, which makes it one of the most secure and decentralized stable asset. There are currently 3013 holders on Ethereum.

RAI market Risk: C+

RAI on Ethereum has a $14,7M market cap. Furthermore the price isn’t correlated by another stable asset but the stability is provided by the Reflexer mechanism. For this reason we consider the risks of RAI mitigated by his only over-collateralized asset: ETH, which is one of the highest market cap and trading volume of ERC-20 token.

LUSD

LUSD Smart contract Risk: B-

The entire Liquity protocol and its stablecoin LUSD are permissionless, governanceless and without any multisig. The way LUSD are minted/burned works around a “Trove”. In order to mint LUSD, you must open a Trove. LUSD will be burned by the repayment of the debt, by the owner of the Trove or by redemptions (Arbitraging). LUSD has generated more than 219k transactions.

LUSD Counterparty Risk: C+

The process to mint LUSD is permissionless, governanceless and without any multisig, which makes it one of the most secure and decentralized stablecoins. There are currently 4915 holders on Ethereum.

LUSD market Risk: B

LUSD on Ethereum has a $184M market cap. Furthermore the price is correlated to the USD by the Liquity over-collateralization mechanism. For this reason we consider the risks of LUSD mitigated by his only over-collateralized asset: ETH, which is one of the highest market cap and trading volume of ERC-20 token.

DAI

DAI Smart Contract risk: B+

All accepted collateral assets can be leveraged to generate DAI in the Maker Protocol through smart contracts called Maker Vaults. The smart contracts are known as Collateralized Debt Positions (CDPs) and the vaults are inherently non-custodial. DAI has generated more than 15,6M transactions on Ethereum.

Counterparty risk: B+

Users interact with Vaults and the Maker Protocol directly, and each user has complete and independent control over their deposited collateral as long the value of that collateral doesn’t fall below the required minimum level (the Liquidation Ratio, discussed in detail below). There are currently 482k holders on Ethereum.

DAI Market Risk: B+

DAI on Ethereum has a $6,5B market cap. Furthermore the price is correlated to the USD and over-collateralized at 140%. For this reason, we consider the risks of DAI mitigated by his over-collateralized assets such as USDC, ETH, BTC, etc. which have the highest market capitalizations and trading volumes of the MRC-20 tokens. The liquidity available on Ethereum is nearly $2,2B with approximately $90M of volume per day on Ethereum.

Collateralization of the DAI and its different collaterals: https://daistats.com/

FRAX

FRAX Smart Contract risk: C+

Frax launched on Ethereum on 21 December 2020. The code has 3 audits from Trail of Bits and Certik, and there are also 2 audits ongoing for 2022. FRAX can be minted and redeemed from the system for $1 of value, allowing arbitragers to balance the demand and supply of FRAX in the open market. At all times in order to mint new FRAX a user must place $1 worth of value into the system. FRAX has generated more than 481k transactions.

Counterparty risk: B-

The Frax DAO operates as a decentralized organization. Frax is open-source, permissionless, and entirely on-chain – currently implemented on Ethereum and 12 other chains. There is no mint function in the Token smart contract, so the team can’t mint token. There are currently 6904 holders on Ethereum.

FRAX Market Risk: B-

FRAX is currently ranked 5th in the list of stablecoins with a capitalization of $1,5B. Furthermore the price is correlated to the USD and over-collateralized at 148% by the Frax factionnal algorithmic mechanism. For this reason we consider the risks of FRAX mitigate by their principal collateralized assets such as USDC and FXS. The liquidity available on Ethereum is nearly $410,4M with approximately $5M of volume per day on Ethereum.

Collateralization of FRAX & FXS : Credmark Terminal - Actionable DeFi Data

wUSK

Smart Contract risk: B

The Kuma Protocol launched in March 2023 and code has audits from Hacken and Code4Arena and has Financial audits by Grant Thornton.

wUSK is the wrapped version of USK and is redeemable for USK at any point.

USK launched on May 11, 2023 and has currently generated more than 20 transactions.

Counterparty risk: B-

The Kuma Protocol multisig is owned by 4/7 multisig currently held by the Mimo Labs team members (this will change in the near future with a multisig shared with elected DAO members), and this multisig has access to different functions such as: Admin_role, Pause/Unpause_Swap, Set_Uri and Set_Epoch_Length.

In addition, KumaSwap uses a central bank oracle to keep the protocol competitive and avoid an excessively high KIBT rate. There is one oracle for each risk class since different risk classes have different interest rates.

Keepers monitor the KIBT and KUMASwap contracts to keep the KIBT yield up-to-date. Keepers are incentivized through the KUMAKeeper contract

Mimo Capital AG (MCAG) is the centralized entity that holds the physical bonds represented by KUMA NFTs is MCAG. MCAG mints new KUMA NFTs every time a user buys a claim to the physical bonds off-chain. Additionally, MCAG maintains the central bank oracle and a multisig with a manager role in the MCAG access controller to manage centralized aspects of the system.

See Kuma Smart Contract Architecture to learn more.

Market Risk: B-

wUSK is a rebase token, which means that the value of 1 wUSK increases continuously according to the central bank’s Oracle feed rate.

wUSK is the wrapped version of USK (ERC-4626 compliant) and is redeemable for USK at any point.

USK is a Kuma IBT (interest-bearing token) backed by ERC-721 NFTs that represent ownership of a physical bond 1. The NFT holder can redeem the NFT off-chain from MCAG for the market-rate bond value at any point.

wFRK

Smart Contract risk: B

The Kuma Protocol launched in March 2023 and code has audits from Hacken and Code4Arena and has Financial audits by Grant Thornton.

wFRK is the wrapped version of FRK and is redeemable for FRK at any point.

Counterparty risk: B-

Keepers monitor the KIBT and KUMASwap contracts to keep the KIBT yield up-to-date. Keepers are incentivized through the KUMAKeeper contract

See Kuma Smart Contract Architecture to learn more.

crvUSD

Smart Contract risk: C+

The Curve DAO operates as a fully decentralized organization and the crvUSD has been audited by mixbytes. There is no admin mint function in the Token smart contract, so the team can’t mint token. There are currently 1,2k holders on Ethereum.

Counterparty risk: C+

Curve is one of the leading DeFi projects. The token is available on top exchanges with nearly $730M market cap with a daily volume of 4M$ on Ethereum although a large share of CRV’s supply is locked. There are currently 163k transactions on Ethereum.

Market Risk: B

The crvUSD token was introduced by Curve a few months ago, and since its launch, its TVL has increased to approximately $730M. The average daily trading volume is ~$20M (CeFi & DeFi) and the liquidity available on Ethereum is nearly $25M.

pyUSD

Smart Contract risk: C+

The pyUSD has been audited by Trail Of Bits. There are admin functions, but as USDP, the admin/issuer is Paxos, which is a regulated entity. There are currently 5k holders on Ethereum.

Counterparty risk: B

pyUSD is a USD-pegged stablecoin minted through Paxos. While it’s still young, it has grown to a circulating supply of over $300M with good peg resilience. There are currently 40k transactions on Ethereum.

Market Risk: C

pyUSD has a market capitalization of approximately $301M. The average daily trading volume, encompassing both CeFi and DeFi, amounted to $15 million. We consider the market capitalization to be justifiable for listing purposes. Although the relatively modest trading volumes indicate a lack of liquidity in the markets, totaling around $40M, this issue can be mitigated through the implementation of supply caps, debt ceilings, and borrowing limits.

Other Assets

WETH

Ethereum is not an ERC-20 token, leading to some missing functionality. Wrapped ETH solves these compatibility issues with an ETH backed token which has gained traction within DeFi.

WETH Smart contract Risk: A-

The WETH token on Ethereum was launched in September 2017. WETH is the wrapped version of ETH, the native currency of Ethereum blockchain. WETH is currently the most decentralized erc-20 token in the world. WETH has generated more than 99M transactions.

WETH Counterparty Risk: A

The process to wrap ETH is permissionless. Anyone can trade ETH with the relay smart contract to get WETH. Similarly WETH can be unwrapped to get the ETH back. There are currently 506k WETH holders on Ethereum.

WETH Market Risk: B+

WETH on Ethereum has a $12B market cap, one of the highest market cap and trading volume of erc-20 tokens. Furthermore the price is pegged to Ethereum’s as it is redeemable for it. For this reason we consider the risks of WETH mitigate by ETH.

WBTC

WBTC is the wrapped version of BTC, the native currency of Bitcoin blockchain.

WBTC Smart contract Risk: A

WBTC is the wrapped version of BTC, the native currency of Ethereum blockchain. WBTC has generated more than 3.4M transactions.

WBTC Counterparty Risk: A

WBTC is centralised with bitcoins custodially locked on the Bitcoin blockchain. The custody is performed by BitGo, a leader in blockchain custodian technologies.

WBTC market Risk: B+

WBTC on Ethereum has a $8.5B market cap, one of the highest market cap and trading volume of erc-20 tokens. Furthermore the price is pegged to Bitcoin’s as it is redeemable for it. For this reason we consider the risks of WBTC mitigate by BTC.

CRV

CRV Smart Contract risk: A-

CRV token was introduced to Curve in August 2020 through liquidity mining and is deployed on Ethereum since May 2021. The code has 3 audits from Trail of Bits, Quantstamp and MixBytes. Curve is the creator of the veMODEL, many protocols were inspired because this model has generated billions of transactions with more than $200B of cumulative volume and $80M of total fees earned. CRV has generated more than 3,7M transactions on Ethereum.

Counterparty risk: B+

The Curve DAO operates as a fully decentralized organization. There is no mint function in the Token smart contract, so the team can’t mint token and the maximum supply can’t be changed. The ecosystem is funded by fees of the Curve Exchange generated by the $250M+ of daily volume across all chains where Curve is deployed. There are currently 79k holders on Ethereum.

CRV Market Risk: C+

Curve is one of the leading DeFi projects. The token is available on top exchanges with nearly $2B market cap with a daily volume of 4M$ on Ethereum although a large share of CRV’s supply is locked. The liquidity available on Ethereum is nearly $94,3M.

BAL

BAL Smart Contract risk: A-

The code has 3 audits from Certora, OpenZeppelin and Trail of Bits. Balancer has generated billions of transactions with more than $47B of cumulative volume through a $3,4B total value locked and $72,3M total fees earned. BAL has generated more than 1M transactions on Ethereum.

Counterparty risk: B+

Balancer is permissionless and the ecosystem is funded by fees of the Balancer Exchange generated by the $70M+ of daily volume across all chains where Balancer is deployed. There is no mint function in the Token smart contract, so, the team can’t mint token and the maximum supply can’t be changed. There are currently 42k holders on Ethereum.

BAL Market Risk: C

The token is available on top exchanges with nearly $371M market cap with a daily volume of 2M$ on Ethereum although a large share of BAL’s supply is locked. The liquidity available on Ethereum is nearly $153M.

AAVE

AAVE Smart Contract risk: B

The code has 5 audits from ABDK, OpenZeppelin, Peckshield, Auditor, Sigma Prime and Trail of Bits. Aave has $13B in total value locked between several chains. AAVE has generated more than 1,7M transactions since its launch on Ethereum.

Counterparty risk: A-

Aave Protocol launched on Ethereum in January 2020 and is now among the top money markets for depositors and borrowers on several chains. There is no mint function in the Token smart contract, so, the team can’t mint token and the maximum supply can’t be changed. There are currently 124k holders on Ethereum.

AAVE Market Risk: B-

The token is available on top exchanges with nearly $1,4B market cap with a daily volume of $1M on Ethereum although a large share of AAVE’s supply is locked. The liquidity available on Ethereum is nearly $115M ($110M from the 80/20 AAVE-ETH BPT).

LINK

LINK Smart Contract risk: A-

The code has 3 audits from Nick Johnson, Quantstamp and SigmaPrime. Chainlink has $39,9B total value secured. LINK has generated more than 11,9M transactions since its launch on Ethereum.

Counterparty risk: A-

Chainlink launched on Ethereum in September 2017 on Ethereum and is now the oracle leader of the market. There is no mint function in the Token smart contract, it means that the team cannot mint tokens and the maximum supply can’t be changed. There are currently 696k holders on Ethereum.

LINK Market Risk: B

The token is available on top exchanges with nearly $6,7B market cap with a daily volume of $4M on Ethereum although a large share of LINK’s supply is staked. The liquidity available on Ethereum is nearly $31,5M.

SUSHI & xSUSHI

SUSHI Smart Contract risk: A-

The code has 2 audits from Quantstamp and Peckshield. Sushiswap has $404M total value locked on various chains and has more than $200B of cumulative volume and Liquidity Provider earned nearly $565M of fees. SUSHI has generated more than 3,2M transactions since its launch on Ethereum.

Counterparty risk: A-

Sushiswap launched on Ethereum in September 2020 and is now among the top DEX in the market. Sushi is a permissionless blockchain protocol where token holders vote on incentives and upgrades. Anyone can create new Sushi markets. There is no mint function in the Token smart contract, it means that the team cannot mint tokens and the maximum supply can’t be changed. There are currently 100k holders on Ethereum.

SUSHI Market Risk: D

The token is available on top exchanges with nearly $228M market cap with a daily volume of $1,5M on Ethereum although a large share of SUSHI’s supply is staked. The liquidity available on Ethereum is nearly $17M.

MKR

Smart Contract risk: A-

The MakerDAO operates as a fully decentralized organization and has been audited by Trail of Bits, PeckShield and Runtime Verification. There is no admin mint function in the Token smart contract, so the team can’t mint token. There are currently 98k holders on Ethereum.

Counterparty risk: B+

Maker DAO has over $7.45B in TVL and is ranked second on Defi Llama TVL rankings. The Maker Protocol is only deployed on the Ethereum network. There are currently 2,1M transactions on Ethereum.

Market Risk: B-

MKR has a market capitalization of approximately $1,8B. The Total Value Locked (TVL) in MakerDAO is about $6.09 billion., and "The combined average daily trading volume, encompassing both CeFi and DeFi, amounted to $50M. We consider the market capitalization to be justifiable for listing purposes. Although the relatively modest trading volumes indicate a lack of liquidity in the markets, totaling around $60M, this issue can be mitigated through the implementation of supply caps, debt ceilings, and borrowing limits.

LST

wstETH

Smart Contract risk: B+

stETH launched on Ethereum on 19 December 2020. The code has multiple audits from Quantstamp, ChainSecurity, Mixbytes, Oxorio, Sigma Prime and StateMind (cf. GitHub - lidofinance/audits). Lido is the core contract which acts as a liquid staking pool. The contract is responsible for Ether deposits and withdrawals, minting and burning liquid tokens, delegating funds to node operators, applying fees, and accepting updates from the oracle contract. Node Operators’ logic is extracted to a separate contract, NodeOperatorsRegistry. stETH has generated more than 669k transactions.

Counterparty risk: A-

Lido relies on a set of oracles to report staking rewards to the smart contracts. Lido on Ethereum is a protocol that runs on the Ethereum blockchain and it is upgradable. The Lido DAO controls the ability to implement day-to-day changes and upgrade the protocol with a successful DAO vote. The Lido DAO is an Aragon organization and the roles and addresses can be checked in the Aragon UI. To mitigate withdrawal risks, Lido staking went live on December 18th through a withdrawal key ceremony performed by a group of the industry’s most trusted builders. stETH currently has 158k holders on Ethereum.

Market Risk: B

stETH is currently ranked 1st in the list of Ethereum Liquid Staking assets with a capitalization of $8,5B. Furthermore, wstETH is the wrapped version of stETH and is redeemable at any time, the price is correlated to the ETH since stETH is the representation of ETH staked through Lido. When withdrawals from the Beacon chain will be introduced (cf EIP Shanghai), it will be possible to redeem ether by burning stETH at the same 1:1 ratio. For these reasons, we consider the risks of stETH mitigated by his principal collateralized assets: ETH. The cumulative (stETH & wstETH) liquidity available is nearly $1.1B with approximately $75M of volume per day on Ethereum.

Ethereum Staking wars : Ethereum Staking Wars

cbETH

Smart Contract risk: D

cbETH launched on Ethereum on 25 August 2022. The code has 1 audit from OpenZeppelin. Coinbase controlled all the privileged keys such as minting/burning and the possibility to blacklist an address. cbETH has generated more than 48k transactions.

Counterparty risk: B

As mentioned above, Coinbase controlled different privileged keys over the cbETH smartcontract. There is no DAO and cbETH isn’t permissionless. There are currently 6990 holders on Ethereum.

Market Risk: B-

cbETH is currently ranked 2nd in the list of Ethereum Liquid Staking assets with a capitalization of $1,8B. Furthermore, the price is correlated to the ETH since cbETH is the representation of ETH staked through Coinbase. For this reason, we consider the risks of cbETH are mitigated by his principal collateralized assets: ETH. The liquidity available on Ethereum is nearly $30,4M with approximately $10M of volume per day on Ethereum.

Ethereum Staking wars : Ethereum Staking Wars

rETH

Smart Contract risk: C+

rETH launched on Ethereum on 9 November 2021. The code has multiple audits from Sigma Prime and ConsenSys Diligence (cf. Audits | Rocket Pool Community Site) in addition of a Immunefi bug bounty. rETH is Rocket Pool’s staked ETH derivative token. Minting rETH is limited exclusively to the Deposit Pool contract. In effect, this acts as an intermediary for each new user depositing ETH in Rocket Pool. rETH has generated more than 102k transactions.

Counterparty risk: B+

rETH is minted when stakers deposit ETH into the Rocket Pool deposit pool, and rETH is burnt when stakers withdraw their ETH. The Rocket Pool contracts do not have permissions that grant administrators mint/burn capabilities. The Rocket Pool Protocol is intended to be run by a “Dual DAO Model 1” - one Oracle DAO (oDAO) and one Protocol DAO (pDAO). Further details and respective DAO responsibilities are set out below. rETH currently has 10,6k holders on Ethereum.

Market Risk: B-

rETH is currently ranked 3rd in the list of Ethereum Liquid Staking assets with a capitalization of $784M. Furthermore, rETH is the wrapped version of rETH and is swappable at any time through LPs, the price is correlated to the ETH since rETH is the representation of ETH staked through Rocketpool. When withdrawals from the Beacon chain will be introduced (cf EIP Shanghai), it will be possible to redeem ether by burning rETH at the same 1:1 ratio. For these reasons, we consider the risks of rETH mitigated by his principal collateralized assets: ETH. The rETH liquidity available is nearly $69M with approximately $3,5M of volume per day on Ethereum.

Ethereum Staking wars : Ethereum Staking Wars

sfrxETH

Smart Contract risk: D

The code has audit code4arena audit for frxETH & sfrxETH and they also have their own bug bounty program for the whole Frax ecosystem. Cumulative sfrxETH & frxETH has generated more than 34k transactions

Counterparty risk: D+

sfrxETH is minted when stakers deposit frxETH into the Frax Protocol deposit pool, and sfrxETH is burnt when stakers withdraw their frxETH. The Frax protocol contracts do have permissions that grant administrators mint/burn capabilities. This was pointed out in code4Arena audit 2.

sfrxETH has multiple counterparty risk to the frax team, including: Managing all validators for frxETH, Minting rights for frxETH (as mentioned above), Withdrawal keys for staked ETH underlying the asset, Control of frxETH Curve LPs generated by withholding 10% of user ETH deposits and pairing with newly minted frxETH. Cumulative sfrxETH & frxETH currently has 2.7k holders on Ethereum.

Market Risk: C-

sfrxETH is an ERC-4626 vault designed to accrue the staking yield of the Frax ETH validators. At any time, frxETH can be exchanged for sfrxETH by depositing it into the sfrxETH vault, which allows users to earn staking yield on their frxETH. Over time, as validators accrue staking yield, an equivalent amount of frxETH is minted and added to the vault, allowing users to redeem their sfrxETH for a greater amount of frxETH than they deposited. The exhange rate of frxETH per sfrxETH increases over time as staking rewards are added to the vault. By holding sfrxETH you hold a % claim on an increasing amount of the vault’s frxETH, splitting staking rewards up among sfrxETH holders proportional to their share of the total sfrxETH. Cumulative frxETH and sfrxETH liquidity available is nearly $250M with approximately $1.5M of volume per day on Ethereum.

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