Gauntlet Q3 2022 Sablier Update

Simple Summary

As outlined in the original Dynamic Risk Parameters proposal, update the Sablier stream at the beginning of every quarter.

Background

Gauntlet’s Risk Management platform quantifies risk, optimizes risk parameters, runs economic stress tests, and calibrates parameters as required. Our agent-based simulations are constructed analogously to how transaction-level backtesting is done in high-frequency and algorithmic trading. These types of actuarial analyses manage over $1 trillion of assets in traditional finance. Gauntlet’s platform provides similar statistical power in these actuarial analyses by modifying these techniques to handle the idiosyncrasies of cryptocurrencies. Our Risk Dashboard provides insight into capital efficiency and the risk of insolvency and liquidations during adverse market shocks.

This past quarter, Gauntlet has delivered the following:

  • Provide five sets of parameter recommendations to manage risk and optimize capital efficiency
  • Continuously monitor market risk in the Compound ecosystem, including publishing a Risk Review to summarize market risk developments in Compound during the May market crash
  • Formulate an Asset Listing Framework for assessing market risk when listing new assets as well as enabling those assets as collateral
  • Kickstart community discussion on developing and optimizing a framework for reserve factors

Specification

As outlined in the original proposal, at the start of every quarter Gauntlet will create a proposal to update the service fee payment (higher or lower) by the formula outlined in the full proposal.

The formula to calculate Gauntlet’s service fee has four components:

  1. An asset multiplier to track risk management complexity
  2. A proxy for capital efficiency
  3. A marginal base fee
  4. VWAP (Volume Weighted Average Price) of COMP

The asset multiplier calculation is log(Number of Assets, 10).

The proxy for capital efficiency is the total borrowed for risk-managed assets. Capital efficiency is realized by borrowing demand. The total borrowed amount is calculated as the 30-day average and rounded down to the nearest $1B.

Gauntlet’s risk management marginal base fee is below:

Below shows Gauntlet’s quarterly service fee denominated in COMP (table calculated at $49.02 30-Day VWAP)

As of 06-30-2022, the 30-Day COMP VWAP is $49.02, the 30-day average borrow is $1.05B, and the number of assets on Compound is 17. With these inputs, Gauntlet’s quarterly fee for the next quarter is 7,530 COMP, representing $332.5k (using 06-30-2022 COMP pricing).

The current Sablier stream is 7,933 COMP per quarter, so to honor the terms of the agreement, we will be adjusting that downward to 7,530 COMP per quarter (the delta being 403 COMP). Instead of setting up a new Sablier stream, Gauntlet will simply pay the protocol reserve the difference upfront.

The Sablier stream ends on 9/27/2022, which is 89 days away from 6/30/2022. 89 days equates to 97.5% of a quarter, so the 403 COMP difference (quarterly rate) corresponds to 393 COMP tokens pro-rata.

Gauntlet will send 393 COMP to the protocol. Specifically, we’ll send the COMP back to the timelock address at 0x6d903f6003cca6255d85cca4d3b5e5146dc33925 where the COMP was streamed from using Sablier in the first place. We will provide a link to the transaction after it has been executed.

As this will be a transaction where Gauntlet simply sends COMP tokens to the protocol reserve, we will not put up a governance vote to approve this transaction. This will save Compound voters the effort and gas costs of voting.

Next Steps

  • Gauntlet will send 393 COMP tokens to the protocol reserve.

Gauntlet has executed the transfer as described in “Next Steps” above.

1 Like