Synthetix is excited to partner with the Gauntlet team to provide automated financial risk management simulations for the Synthetix protocol. The unique mechanics of the Synthetix protocol require deep analysis to optimize, and Gauntlet has the resources, systems, and experience to ensure that Synthetix has both proper risk management and optimized capital efficiency.
Gauntlet is a simulation platform for on-chain risk management. Gauntlet uses battle-tested techniques from the algorithmic trading industry to help protocols manage risk, fees, capital efficiency, and rewards. Their risk scoring and agent-based simulation models optimize parameter decisions for tens of billions of dollars in DeFi TVL.
Debt Pool Risk Management
The Synthetix debt pool is what powers the protocol and the synths. The debt pool enables other protocols to execute trades with deep liquidity, zero price slippage, and highly competitive fees. The debt pool serves as the counterparty to all trades that use Synthetix as a backend. Stakers take counterparty risk against the overall composition of the debt pool, regardless of what synths they individually hold.
Gauntlet has developed financial models to assess debt pool risk and provide recommendations on critical parameters such as the collateralization ratio and liquidation ratio to manage protocol and staker debt pool risk properly.
Liquidation Mechanic Assessment
When a Synthetix Stakers collateralization ratio goes below the set liquidation ratio, currently 200%, they are flagged for liquidation. If users don’t add more collateral or burn synths to increase their C-Ratio, they risk losing some of their collateral. Gauntlet will assess the liquidation delay parameters to manage market risk optimally.
Ongoing Assessments and Risk Management
Gauntlet will deliver a detailed report to the Synthetix community with recommendations to ensure protocol risks are managed effectively. Our partnership with Gauntlet will help guide risk management decisions for protocol governance decisions. We look forward to working with them as Synthetix continues to scale.
You can learn more about Gauntlet here or join the Synthetix conversation in our Discord.