How Does Nord Savings Work — Part 3

  1. Smart Contract Risk — Smart contracts essentially presume the role of “intermediaries” in DeFi. While DeFi is often referred to as trustless, a user of a DeFi platform must trust the smart contract they are interacting with. Thus, DeFi Score assigns ratings to each smart contract based on Code Audit Reports being publicly available, bug bounty programs and the contracts time on mainnet.
  2. Financial Risk — While most lending platforms use over-collateralization to reduce credit risk, over-collateralization does not completely remove credit risk. Crypto assets are notoriously volatile and these platforms have no method to recover from system insolvency caused by volatile collateral assets. DeFi score assigns a rating to this risk based on Collateral Ratios and available Liquidity in the protocol.
  3. Centralization Risk — A key cause for concern in DeFi is the access of admin keys as these allow the protocol developers to change different parameters within their smart contracts. Systems such as oracles, interest rates could be adjusted or even entire funds could be withdrawn. DeFi Score assigns rankings to various protocols based on 3 key parameters — protocol administration and the type of oracles used by the protocol.
  1. Team Background — Anonymous vs. Public Teams.
  2. APY Fluctuations — Daily tracker on APYs to determine fluctuations and reallocate capital.
  3. Protocol Integration — <5% allocation to 3rd party lending protocols to observe reliability and security prior to complete integration.
  1. Maximize APYs in real-time across all pools where Nord Finance invests.
  2. Assess pool risk profiles by combining the DeFi Score Framework with Nord’s proprietary research algorithm.

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Nord Finance

Nord Finance

An Advanced Decentralized Finance Ecosystem