Announcing Ecosystem Risk Monitoring for Linea

Gauntlet is excited to partner with Linea to provide continuous risk monitoring throughout the Linea ecosystem. To kick off this partnership, we have launched the Linea ecosystem risk dashboard, which will serve as a foundation for our risk platform on Linea. As the ecosystem develops, we look to onboard protocols on Linea for more customized risk management tailored to specific protocol needs.

Linea Ecosystem Risk Dashboard

The Linea ecosystem risk dashboard provides all participants in the Linea ecosystem with ongoing visibility into market conditions and risks. The dashboard will evolve over time to include new assets and protocols that reach and sustain a significant level of activity. Below, we have prepared a brief user guide to introduce the metrics used and where to find them on the dashboard. 

Ecosystem Summary

This view provides headline statistics on liquidation and insolvency risks in the Linea ecosystem. The breakdown of risks by asset helps users quickly identify their potential exposures and decide which assets to view in more detail. 

The headline risk metrics are derived from Gauntlet’s core methodology for Value-at-Risk (VaR) and Liquidations-at-Risk (LaR), which we developed while managing risk for a wide range of DeFi lending protocols. To scale the methodology to the entire Linea ecosystem, we use a simplified version that focuses primarily on large protocols and correlated market drawdowns across the major assets. 

Insolvency Tail Risk – The estimated amount of debt that would be insolvent in an extreme and correlated price drop across all collateral assets. This value is based on data from the largest protocols in the ecosystem and a simplified model derived from our full Value-at-Risk (VaR) methodology. In the future, this may be upgraded to a more tailored VaR metric for protocols that onboard to Gauntlet’s protocol-specific Risk product.

Liquidations-at-Risk (LaR) – The estimated amount of collateral that would be liquidated in an extreme and correlated price drop across all collateral assets. This value is based on data from the largest protocols in the ecosystem and a simplified model derived from our full LaR methodology. In the future, this may be upgraded to a more tailored LaR metric for protocols that onboard to Gauntlet’s protocol-specific Risk product.

Asset Summaries

This view allows users to focus on specific assets in the Linea ecosystem, with links to separate asset-level pages via the “Details” buttons. The table also shows major protocols listing each asset and key metrics at the asset level, as described below.

Volatility – The volatility in the USD spot price of the asset over the previous 28 days, calculated using the Garmann-Klass methodology.

Ecosystem Market Cap – The supply of the asset circulating within the ecosystem multiplied by its recent spot price

Insolvency Tail Risk – An estimate of the insolvency tail risk (as defined earlier) that is attributable to the specific asset’s use as collateral in the Linea ecosystem. 

Lending Protocol Summaries

This view provides more detail on lending protocols in the Linea ecosystem, which are a key focus of market risk management in the early development of the ecosystem. The panel helps users visualize the composition of top whale accounts that may have an outsized impact and the overall composition of collateral and debt on lending protocols.

Whale Accounts – Breakdown of the most impactful accounts on lending and derivatives protocols within the ecosystem, ranked by collateral supplied. The charts show the supply and borrow composition of the top 10 whale accounts.

Asset Distribution Over Time – Breakdown of the borrowed and supplied assets on lending and derivatives protocols within the ecosystem. The charts show the recent history of supply and borrow composition by asset, measured in USD.

Asset-Level Pages

The asset-level pages focus on the roles of key assets in the Linea ecosystem and can be accessed from the asset summaries described earlier via the “Details” buttons. This view gives users a closer look at market conditions and the risks attributable to specific collateral assets.

Protocol Risk Metrics – Estimates of liquidations-at-risk and insolvencies tail risk related to the asset, broken down across top protocols in the Linea ecosystem. This view provides a convenient reference for how risk is distributed for a specific collateral asset.

Slippage Curves – An estimate of slippage for trades of the given sizes, using proprietary models informed by data from a variety of sources including local DEXs and DEX aggregators. This metric is an important driver of risk because it can constrain the profitability of liquidations under extreme market conditions.

Historical Market Cap and Volatility – Recent history of the asset market cap and volatility, as defined in the asset summaries.

Liquidation Curve – The estimated amount of currently healthy collateral that would be liquidated if the asset price drops to a certain level. The liquidation curve can help users visualize the distribution of liquidation thresholds for a specific collateral asset.

Top 10 Suppliers – Breakdown of the top 10 suppliers of the asset within the ecosystem, showing all the assets they supply, denominated in USD.

Borrows Against Top 10 Suppliers – Breakdown of the borrows of the top 10 suppliers, showing all the assets they are borrowing, denominated in USD.

We welcome feedback on the Linea ecosystem risk dashboard and will continuously upgrade it as the ecosystem evolves. To talk to Gauntlet about risk management for a protocol on Linea, contact us here.