Cryptoassets

In order to carry out financial activities through the Money Pool, at least two types of cryptoassets are required in the Money Pool. In the case of a crypto asset-backed loan, one type of cryptoasset must be deposited before another type of cryptoasset can be loaned. Therefore, it is easy to secure the liquidity of the Pool when the protocol can use various types of cryptoassets as collateral.

The price and status of cryptoassets introduced in ELYFI affect the entire Money Pool because the status of the Money Pool is closely related to the total value of cryptoassets deposited in the Money Pool. If the price of a particular type of crypto asset changes rapidly or an entity’s malicious actions cause great volatility, it can pose a threat to the entire Money Pool.

Therefore, the selection of cryptoassets that can be deposited or loaned as collateral in the protocol must be carefully made. In addition, the risk associated with each type of asset is evaluated and the interest rate for each is set differently based on this, with the liquidity ratio of cryptoassets supplied to the Pool adjusted accordingly.

Criteria

The criteria for determining cryptoasset risk levels are as follows:

• Technology Safety: Evaluates the stability of smart contracts related to specific types of cryptoassets, and therefore whether high technical stability exists.

• Community: Evaluates community structure and activities that lead the cryptocurrency ecosystem. The larger the scale and the more consistent the activities are, the better the evaluation outcomes are.

• Issuance/circulation volume: Cryptocurrency issuance and market circulation volumes are measured. The higher the distribution volume and distribution ratio are, the better the evaluation outcomes are.

• Volatility: Evaluates the period-specific volatility of cryptocurrencies.

The team of protocol developers first determines the level by referring to other DeFi platforms. However, this may be changed in the future by collecting feedback from the Governance.