Season Recaps

Season 1 Recap

During Season 1, the Risk Working Group made significant strides in enhancing the protocol’s risk management framework. The team focused on developing new methodologies, collaborating with other working groups, and implementing measures to ensure the safety and security of users’ funds. A comprehensive overview of the team’s strategic planning and execution was showcased through this Gantt chart, highlighting 18 projects initiated and successfully completed during the season.

One of the key achievements was the development of frameworks such as the Collateral Parameterization Model, the LP Analysis and FiRM Daily Borrow Limits Framework and the Liquidation Factor and Minimum Debt Methodology. These tools allowed the RWG to make data-driven recommendations for FiRM, improving the protocol’s ability to anticipate potential risks. The RWG also introduced the Risk Observer Checklist, a weekly deliverable providing a concise overview of key health indicators for Inverse Finance products. This proactive monitoring enabled the team to drive protocol adjustments based on evolving market conditions, ensuring ongoing robustness in risk management strategies.

The RWG worked diligently on upgrading its collateral onboarding process by enhancing risk assessments. A cadence was established to revise past assessments, utilizing the newly developed frameworks and monitoring tools to track the evolving risk profiles of collaterals integrated into FiRM. This allowed for a comprehensive understanding of the risk landscape and led to initiatives to fine-tune FiRM’s safety posture.

In terms of security measures, the RWG led initiatives to revamp the bug bounty program by migrating hosts from Hats Finance to ImmuneFi and by successfully petitioning the DAO to increase the bounty size. This move significantly increased engagement from security researchers, leading to more submissions and improved scrutiny of the protocol’s codebase. The RWG also engaged with several auditing firms, resulting in a comprehensive audit and security review of the sDOLA smart contracts by yAudit. The RWG also participated in cross-working group initiatives, shared ownership of SecOps and the Bug Bounty Program, and played a significant role in the head-of-multisigs responsibilities.

Throughout the season, the RWG effectively identified and assessed numerous risks, conducting revised risk assessments for various collateral assets such as cvxFXS, CRV, cvxCRV, st-yCRV, INV, and wBTC. There were zero security incidents recorded, demonstrating the effectiveness of the implemented risk mitigation strategies and proactive measures. The RWG maintained timely responses to bug submissions through the ImmuneFi Bug Bounty Program, adhering to acceptable response times and ensuring swift action when necessary. Additionally, the team put forward 19 risk-centric proposals during the season, all of which passed through governance with a 100% approval rate.

As Season 1 concluded, the RWG set its sights on building upon the solid foundation established. The team aims to enhance strategies, tools, and collaborations to address evolving challenges as Inverse Finance continues to grow its suite of products. The RWG remains committed to maintaining transparency and fostering education around risk management practices, with plans to continue the “Behind the Scenes” series to empower community members and contribute to the protocol’s safety and success. For a more detailed recap, head over to our "Behind the Scenes: Season 1 Recap" forum post!

Season 2 Recap

During Season 2, from May 1st to October 31st, 2024, the RWG built upon the strong foundation established in Season 1, focusing on enhancing existing risk management frameworks, conducting comprehensive risk assessments, and devising key projects to strengthen the protocol's security posture.

Throughout the season, the RWG modernized its risk management frameworks starting with redesigning the liquidity providers sheets to improve data accuracy and usability of the Daily Borrow Limit framework. Liquidation scenario modeling was refined in the Collateral Parameterization Model to include factors like gas costs in liquidation simulations and revising profit calculations methodologies. This modernization required collaboration among Risk and Analytics working groups and ultimately has led to better-informed recommendations for FiRM market settings.

The RWG conducted new risk assessments and proposed new markets on FiRM, including new LP collaterals DOLA/FRAXpyUSD LP, DOLA/crvUSD LP, and DOLA/FRAXBP, as well as sFRAX, sUSDe, COMP, cbBTC, and PT-sUSDe-MAR2025. These assessments involved thorough analysis of the assets' risk profiles which include studies into the collateral liquidity, oracles, liquidations, and escrows, the contract ownership, upgradability, immutability, and audits, and the underlying protocol operational structure, transparency and centralization risks. Updated risk assessments for existing markets such as CRV, cvxCRV, and st-yCRV led to the unpausing of these markets after reassessing their safety. Building off of these assessments, the RWG prepared and advanced several proposals, facilitating market launches and adjustments, recommending parameter changes, and pausing and resuming markets when necessary. In all this, the Risk Observer Checklist remained a critical deliverable, providing a concise weekly and monthly overview of key health indicators for FiRM markets and other Inverse Finance products that helped drive policy.

SecOps initiatives were a significant focus during the season, with a "Four Lines of Defense" strategy being devised and pursued. The RWG maintained our channels with third-party auditors, and explored partnerships with security vendors like ZeroShadow and Forta to evaluate advanced threat detection and automated response solutions, aiming to integrate circuit breakers and real-time monitoring. The RWG enhanced the bug bounty program by increasing its size, successfully petitioning the DAO to add 40,000 DOLA to incentivize higher-quality submissions and engaging with ImmuneFi to improve effectiveness. Adopting ImmuneFi's Safe Harbor framework is forthcoming, pending Inverse Finance entity formation. Challenges such as low-quality and spam submissions were addressed, and the program's scope was updated to make it easier for researchers to focus on relevant areas. The RWG also worked with the AWG to enhance alerts and monitoring tools through Inverse Watch, setting up oracle variance alerts and focusing on critical signals.

A Liquidator Grants Program was launched to incentivize liquidators, ensuring they are adequately rewarded and active within the ecosystem, which is crucial for market health. We are still actively seeking to establish communication with MEV actors to understand their influence and onboard them to our ecosystem. Other R&D projects included performing due diligence on StakeDAO's OnlyBoost for FiRM integration, exploring new framework development in studying gauge health based on protocol ownership, bribe mechanisms, and historical data, and more.

With a strong focus on continuous improvement, the RWG remains dedicated to proactively identifying and mitigating risks, fostering collaboration across working groups, and ensuring the safety and stability of Inverse Finance as it continues to expand its suite of products. The team's efforts during Season 2 have solidified the foundation for future growth and innovation. For a more detailed recap, head over to our "Behind the Scenes: Season 2 Recap" forum post!