BNB Chain: Risk Management

[VictoQ]

Description 📃

Risk management and mitigation are of paramount importance in any development product, and are existential to the blockchain domain. In the last few years, the industry has witnessed a myriad of security breaches and abusive use cases - this has to stop!

The composability of DeFi enables the BNB dApps to connect with the rest of the ecosystem; however, it also exposes the whole ecosystem as well as its users to various risks. At least three different aspects of risk are important to assessing whether an asset exposes the BNB Chain to undue risk: smart contract risk, counter-party risk, and market risk.

To address smart contract risk, over the last year, BNB Chain has introduced AvengerDAO security initiative to protect users from financial losses and deter malicious actors and applications, and it has been a huge success. Through partnerships with the leading industry security organizations, we've managed to considerably reduce the number of misdeeds on the BNB Smart Chain.

During this year we want to address the counter-party and market risks. As part of the challenge you’re to design an implement either one of them as a framework exposing API to the potential users. You can use any methodology as long as it has academical backing with references to the research papers. As bonus points you can add some sort of user interface to visualize the results.

Please see more details to what counter-party and market risks are.
Counter-party risk assesses qualitatively how and by who the asset is governed. There are different degrees of governance decentralization that may give direct control over funds (e.g., as backing) or attack vectors to the governance architecture, which could expose control and funds. Counterparty risk is determined by the level of centralisation, which is measured by the number of parties that control a token’s protocol, as well as the number of holders and the level of trust in the entity, project, community or processes.

Market risks are linked to the size of a particular asset pool in the protocol, as well as fluctuations in both supply and demand. The markets need to hold sufficient volume to account for any liquidations in the particular pool (i.e., sell offs which tend to lower the price of the underlying asset through slippage affecting the value recovered). Market risk assessments usually involve assessment of the volatility and the liquidity of the assets, but additional extensions are welcome.

Acceptance Criteria 🏁

• Design and implement a framework that exposes an API for either counter-party or market risks on the BNB Smart Chain.

• The framework can have academic backing with references to research papers.

• The methodology used should be able to assess the risks effectively and provide actionable insights.

• Bonus points will be given for including a user interface to visualize the results.

• The implementation should be secure and reliable, with a focus on risk management and mitigation.

• The solution should address the risk factors specific to the BNB Smart Chain ecosystem.

• The code should be well-documented, easy to understand, and open-sourced.

• The submission should include a demonstration video/tutorial of the framework's usage.

Reward Pool 💸

USDC 20000