cryptickatz

Protocol Autopsist @Chainlink

views my own and not financial advice

[cryptickatz @cryptickatz]

https://t.co/SK7WW4KXSP

[cryptickatz @cryptickatz]

@moizali Turku, Finland

[cryptickatz @cryptickatz]

@naruto11eth if you are in datacenters pivot to sheep rearing

[cryptickatz @cryptickatz]

@naruto11eth Where is Blast?

[cryptickatz @cryptickatz]

How about we make this DeFi United thing permanent? Like top protocols and orgs in the space come together to create an insurance fund sort of DAO and offer support to protocols in case of hacks where its deemed justified to.

[Circle @circle]

Circle Ventures is purchasing $AAVE tokens because strong DeFi infrastructure does not build itself. Aave is helping to shape the future of onchain finance, and we’re backing that ecosystem and the entire community built around it.

DeFi United

[cryptickatz @cryptickatz]

@Grimjows Too early to say.

[cryptickatz @cryptickatz]

Great to see the DeFi community stepping up to donate to Aave in the light of losses due to KelpDAO exploit however Aave has $220 million+ funds in safety module to use exactly for the times like this wondering if any amount from it will be utilized now.

[cryptickatz @cryptickatz]

@GoneMultichain Yeah time to ditch LZ

[cryptickatz @cryptickatz]

A lot has been talked about 1/1 DVN issue in the KelpDAO exploit however what I am more concerned about is how were the RPCs poisened in the first place? No of DVNs wouldn't have mattered much in this case exploit would have still happened.

[cryptickatz @cryptickatz]

Well make it 100 now lol

[cryptickatz @cryptickatz]

Hot take but deploying funds in 99% DeFi protocols today is - EV

[cryptickatz @cryptickatz]

@ImperiumPaper I think the buyer is almost entirely the gift-giver demographic grandparents, parents, aunts etc buying them for kids' birthdays or graduations. The illiquidity you're complaining about is probably why they buy it to avoid any risk ppl cash it out early for smth dumb.

[cryptickatz @cryptickatz]

@santiagoroel https://t.co/iOy1j8Ah31

[cryptickatz @cryptickatz]

Like where your head’s at but this security metric breaks pretty fast under scrutiny: 👇

1. DSPR punishes scale, not risk
once you cross a certain security threshold, extra spend has brutal diminishing returns.

- a $5B TVL protocol might be way more battle-tested + hardened but show lower DSPR than some $50M farm throwing money around.
you end up rewarding inefficiency, not actual security.

2. completely gameable numbers:

a huge chunk of real security spend isn’t cleanly onchain (audits, internal teams, private bounties).
and even if you force “onchain receipts”, protocols can just… loop money, overpay friendly auditors, or label random spend as “security”.
you’re basically trusting self-reported accounting in a trust-minimized system lol.

3. Spend ≠ competence
throwing $$$ at security doesn’t mean shit if:
– audits are low quality
– findings aren’t actually fixed properly
– architecture is flawed at the base layer
– team just doesn’t have security culture.

we’ve seen protocols spend millions and still get nuked.

4. no signal on what actually matters
this ignores the real primitives of security:

code quality, formal verification, invariant testing, upgrade patterns, key management, time in market, exploit history, etc. Those are the things LPs actually care about, not some expense ratio.

5. perverse incentives teams could optimize for “looking secure” (high DSPR) instead of being secure. classic metric gaming → same shit tradfi did with ratings pre-2008.

imo if you want a real “DeFi risk premium” input, it has to be composite
+ behavior-driven, not just financial:
– code audit depth + auditor quality
– % of code formally verified
– bug bounty size and payout history
– time since last exploit / incident response quality
– upgradeability + admin key risk
– onchain monitoring + circuit breakers

yes, then maybe security spend as a minor factor

[cryptickatz @cryptickatz]

Like where your head’s at but this security metric breaks pretty fast under scrutiny: 👇

1. DSPR punishes scale, not risk
once you cross a certain security threshold, extra spend has brutal diminishing returns.

- a $5B TVL protocol might be way more battle-tested + hardened but show lower DSPR than some $50M farm throwing money around.
you end up rewarding inefficiency, not actual security.

2. completely gameable numbers:

a huge chunk of real security spend isn’t cleanly onchain (audits, internal teams, private bounties).
and even if you force “onchain receipts”, protocols can just… loop money, overpay friendly auditors, or label random spend as “security”.
you’re basically trusting self-reported accounting in a trust-minimized system lol.

3. Spend ≠ competence
throwing $$$ at security doesn’t mean shit if:
– audits are low quality
– findings aren’t actually fixed properly
– architecture is flawed at the base layer
– team just doesn’t have security culture.

we’ve seen protocols spend millions and still get nuked.

4. no signal on what actually matters
this ignores the real primitives of security:

code quality, formal verification, invariant testing, upgrade patterns, key management, time in market, exploit history, etc. Those are the things LPs actually care about, not some expense ratio.

5. perverse incentives teams could optimize for “looking secure” (high DSPR) instead of being secure. classic metric gaming → same shit tradfi did with ratings pre-2008.

imo if you want a real “DeFi risk premium” input, it has to be composite
+ behavior-driven, not just financial:
– code audit depth + auditor quality
– % of code formally verified
– bug bounty size and payout history
– time since last exploit / incident response quality
– upgradeability + admin key risk
– onchain monitoring + circuit breakers

yes, then maybe security spend as a minor factor

[Santiago R Santos @santiagoroel]

DeFi has lost between $730M and $3.1B to exploits every single year since 2021.
TVL has swung from $175B peak to $45B trough and back above $100B.
The loss rate as a % of TVL is 1–3% / year depending on the cycle.
I've been thinking about a simple metric to price this risk: the DeFi Security Premium Ratio (DSRP).

DSPR = Security Spend / TVL.
Reported quarterly. Both sides verifiable on-chain.

Five tiers: Hardened (>1%) / Protected (0.5–1%) / Baseline (0.2–0.5%) / Underspending (0.05–0.2%) / Exposed (<0.05%)

DSPR acts as a yield pricing input.
Low DSPR = higher required yield to compensate LP for security risk.
High DSPR = protocol earns a lower cost of capital.

We need a ratings mechanism on chain to price yield

Any protocol that is underspending in security needs to be called out and either spend more, divert more fees to an insurance fund, or both

@Blockworks you should add it to the token transparency portal. but now do one for protocol health

L1s should also carve out % of validator rewards or fees to DeFi protocols taking security seriously

Need to think more about how to verify and create manipulation-resistant security spend receipts @_SEAL_Org - any ideas?

[cryptickatz @cryptickatz]

@SaurabhDhekale @KhanAbbas201 Yeah such precise incentives could work however you must ensure that once incentives fill the gap you can still keep yield competitive without incentives, which has proved to be a challenge so far for both chains and protocols alike.

[cryptickatz @cryptickatz]

@SaurabhDhekale @KhanAbbas201 in most cases it's bad idea as very few chains today have a sticky retention moat. Which means with incentives your CAC is always &gt; user LTV

[cryptickatz @cryptickatz]

@DefiIgnas Exactly and it's not just WLFI, USD1 has the same liquidity and bad debt accumulation issue.

https://t.co/6oe59fINr4

[cryptickatz @cryptickatz]

are you a @Dolomite_io lender? run away with your funds as fast as you can.

It's absolutely nuts of them for not having optimum collateral caps for both WLFI and USD1 on such thin liquidity.

Current Uniswap V3 liquidity of USD1/USDC pool is $1.4M. The deepest WLFI pool is $6.12M.

If liquidators try swapping a USD1 amount greater than $4.7M the slippage is 80%+ making liquidation futile.

It's even worse for WLFI due to poorly optimised liquidity with slippage going berserk for swaps as low as $500K.

Even 0.5% of the WLFI pool can't be liquidated at profit and will result in bad debt.

This is just a time bomb at this point and lenders are going to be toast.

[cryptickatz @cryptickatz]

are you a @Dolomite_io lender? run away with your funds as fast as you can.

It's absolutely nuts of them for not having optimum collateral caps for both WLFI and USD1 on such thin liquidity.

Current Uniswap V3 liquidity of USD1/USDC pool is $1.4M. The deepest WLFI pool is $6.12M.

If liquidators try swapping a USD1 amount greater than $4.7M the slippage is 80%+ making liquidation futile.

It's even worse for WLFI due to poorly optimised liquidity with slippage going berserk for swaps as low as $500K.

Even 0.5% of the WLFI pool can't be liquidated at profit and will result in bad debt.

This is just a time bomb at this point and lenders are going to be toast.

[Ignas | DeFi @DefiIgnas]

Don’t be exit liquidity for Trump’s cartel:

They deposited $484M of $WLFI tokens to borrow USDC.

Those loans will likely never be repaid.

Instead, when Trump leaves office, or even after the midterms if Republicans lose, $WLFI will dump, and Dolomite will be stuck with BAD DEBT.

As a result, USDC lending rates are at 13.5%. But even that APY isn’t worth the risk of not being able to withdraw your deposit.

Everyone knows this.

No surprise Dolomite's $DOLO trades at just $15M market cap because it's a turkey getting ready for Thanksgiving.

[cryptickatz @cryptickatz]

No Flagship androids infact better in lot of aspects but its the familiarity and network effects, you use what everyone around you is using and once you start using you become comfortable.

It's same with Metamask it is the most known wallet and most users have entered defi through it so despite high fees and terrible UX they are too lazy to move out of their comfort zone.

[cryptickatz @cryptickatz]

@KhanAbbas201 The biggest reason behind 95% red chart is no strong retention moat + broken tokenomics and then when you put incentives on top it's like pouring water out of sinking ship.

[cryptickatz @cryptickatz]

@DeFi_Andree ty a condensed thread version coming soon!

[cryptickatz @cryptickatz]

https://t.co/SK7WW4KXSP