Nick Cannon: Risk Management in DeFi - [Web3 Breakdowns, EP.47]

This is Eric Golden and my guest today is Nick Cannon. Nick is the Head of Growth at Gauntlet, a simulation and financial modeling platform for DeFi protocols. In our conversation, we breakdown the financial attack on Mango, how better DeFi governance mitigates risk, and why governance is a bottleneck in most protocols. Please enjoy this conversation with Nick Cannon.   For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.   -----   Web3 Breakdowns is a property of Colossus, LLC. For more episodes of Web3 Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @Web3Breakdowns | @ericgoldenx | @patrick_oshag    Show Notes [00:02:38] - [First question] - His take on FTX selling itself to Binance  [00:03:24] - Categorizing at a high level the different sectors of DeFi [00:04:11] - How DeFi handles the subjective parts of credit financing [00:05:11] - What Mango is and what happened to them in their recent attack [00:10:03] - Whether or not a decision was made to settle with the attacker   [00:10:39] - How the insurance funds are structured for DeFi protocols [00:12:22] - Getting through the cold start problem of launching a new exchange [00:14:04] - What Gauntlet is and what they do  [00:14:54] - His view on DeFi attacks in general  [00:15:52] - The story of how Gauntlet came to be  [00:16:44] - Thoughts about safety and experimenting as early adopters  [00:17:51] - Working with protocols to help them navigate risk management [00:18:53] - Being a key player in risk management in the crypto space can be a dangerous and thankless job [00:20:17] - Thinking about alignment being third party players on a contract  [00:21:12] - What it’s like to simulate and present risk to clients and how they receive it  [00:23:05] - Whether or not the Mango Squeeze can be done anywhere with enough money [00:24:05] - What position limiting and supply caps are and how they work    [00:25:12] - Going about implementing risk parameters into a protocol [00:26:06] - Whether or not Gauntlet is running an API and involved on an ongoing basis  [00:26:51] - How hard it is to get a voting consensus in risk management   [00:27:30] - Pitching fine tuning risk parameters to a protocol  [00:28:32] - Gauntlet’s liability and being held accountable if something bad happens [00:29:30] - What he was doing before joining Gauntlet  [00:30:24] - Bullish and bearish factors for the future growth of Gauntlet  [00:31:21] - Whether or not this space will ever self-govern or require outside regulation [00:32:01] - The mechanism for incentive optimization and how it works [00:34:02] - Inherent flaws of third party staking to get liquidity without collateral requirements and risk parameters  [00:37:44] - How Gauntlet has such a widespread impact over an exchange like Sushi [00:39:45] - Whether or not they use their data for other applications or advantages  [00:40:17] - What he’s most excited to see built over the next six months and six years   Learn more about your ad choices. Visit megaphone.fm/adchoices