Understanding a Risk Model

In order to assign a Risk Score to various Strategies, we need a quantitative method for assessing the risk associated with a particular strategy and protocol(s). A Risk Model aims to translate the risk of a given strategy and protocol to a Risk Score via input variables like TVL, days deployed and APY.

The first Risk Model available in the Spool Ecosystem is the Spool Labs Risk Model. The input variables for that Risk Model can be found here:

Genesis Risk Model

Everyone can create, submit and curate Risk Models to be used within the Spool Ecosystem. This freedom allows participants who are willing and able to manage their own risk to create Vaults that are tailored to their needs perfectly, while still enjoying the economical benefits of using Spool.

Risk Models need to be proposed to the DAO and subsequently voted in, in order to be used within the Spool Ecosystem. When the DAO vets a Risk Model, the creator must stake a certain amount of SPOOL Tokens to ensure that the incentives of the Risk Model Provider align with what is best for the Spool Ecosystem.