Asset Risk Assessment
Part in due to Tren Finance’s isolated module approach, the protocol is able to offer assets that are typically unavailable on borrowing/lending and CDP protocols. In line with Tren Finance’s goal of unlocking liquidity for long-tail assets, the listing team at Tren Finance is actively on the lookout for innovative assets that users may want to use as collateral on the protocol. Once such an asset is found, the asset will go through the Asset Risk Analysis process outlined below. If the asset passes the risk analysis test, the asset will likely start with a relatively low trenUSD borrow allocation to mitigate risk, and increase based on borrowing demand of the isolated module and continued risk evaluation of the asset.
Risk Methodology
The asset risk analysis process can largely be divided into market risk analysis and technical risk analysis, with many aspects of risk analysis requiring both market and technical viewpoints. The information from this risk analysis is taken into account to reach risk parameters such as LTV, liquidation threshold, and trenUSD borrow allocation for an asset’s isolated module.
| Score | Market Cap | Holders | Total Transfers | Liquidity (TVL) | Buy-side Impact | Sell-side Impact |
|---|---|---|---|---|---|---|
Weight | 18% | 18% | 18% | 18% | 14% | 14% |
1 | ≥ $5,000,000 | ≥ 500 | ≥ 15,000 | ≥ $500,000 | ≤ 40.00% | ≤ 40.00% |
2 | ≥ $10,000,000 | ≥ 1,000 | ≥ 25,000 | ≥ $1,000,000 | ≤ 30.00% | ≤ 30.00% |
3 | ≥ $30,000,000 | ≥ 2,500 | ≥ 50,000 | ≥ $2,500,000 | ≤ 20.00% | ≤ 20.00% |
4 | ≥ $50,000,000 | ≥ 5,000 | ≥ 100,000 | ≥ $5,000,000 | ≤ 15.00% | ≤ 15.00% |
5 | ≥ $100,000,000 | ≥ 10,000 | ≥ 250,000 | ≥ $7,500,000 | ≤ 10.00% | ≤10.00% |
6 | ≥ $250,000,000 | ≥ 25,000 | ≥ 500,000 | ≥ $10,000,000 | ≤ 7.50% | ≤ 7.50% |
7 | ≥ $500,000,000 | ≥ 50,000 | ≥ 1,000,000 | ≥ $25,000,000 | ≤ 5.00% | ≤ 5.00% |
8 | ≥ $1,000,000,000 | ≥ 100,000 | ≥ 5,000,000 | ≥ $50,000,000 | ≤ 2.50% | ≤ 2.50% |
9 | ≥ $5,000,000,000 | ≥ 250,000 | ≥ 10,000,000 | ≥ $100,000,000 | ≤ 1.00% | ≤ 1.00% |
10 | ≥ $10,000,000,000 | ≥ 500,000 | ≥ 50,000,000 | ≥ $200,000,000 | ≤ 0.50% | ≤ 0.50% |
While the table above is a useful framework for risk evaluation of most spot ERC-20 assets, adjustments must be made on a case-by-case basis for different asset types.
With vault tokens for example, it’s unlikely that they will have direct swap liquidity, so the underlying asset can be used instead for risk factors such as market cap, liquidity, and buy-side / sell-side price impact. Similarly with LP tokens, most of the 6 risk factors above aren’t applicable, so risk analysis will weigh more heavily towards total liquidity of the LP token, and an analysis of the underlying assets in the liquidity pool.
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