Integrate Chaos Labs’ Risk Oracle to Venus Protocol

[Danny]

Summary

This proposal seeks to integrate Chaos Labs’ Risk Oracle into the Venus protocol, to enhance the efficiency and accuracy of risk parameter updates. The Risk Oracle will enable real-time and automated adjustments to market configurations, reducing manual intervention and improving the trading experience for users.

This potential integration continues Venus’ commitment to making the protocol as transparent and antifragile as possible, ensuring that the core functions of data truth, risk-based market parameters, and protocol upkeep continue to be performed by independent leaders in the space.

Motivation

Chaos Labs is the Risk Manager for Venus protocol, performing a range of economic and security risks, including providing specific market parameters for Venus. These parameters are currently offered based on periodic time-based reviews and in response to specific market or associated events that affect the risk profile of markets (ex., Significant utilization spikes or increasing number of liquidations). These recommendations are then manually updated and reviewed continuously per the abovementioned process. While effective, this process is time-consuming and introduces a latency in responding to market changes. This latency causes market parameters to be more conservative than they would otherwise be, as they need to account for a reasonable range of market conditions without frequent updates.

Integrating the Risk Oracle allows for increasing automation of parameter updates over time, ensuring that market parameters—such as supply and borrow caps, interest rates, and more—are adjusted in real-time based on global market data. This will boost the protocol’s competitiveness by optimizing execution costs through more accurate risk parameters and reducing development efforts.

Rationale

Integrating Chaos Labs’ Risk Oracle is a beneficial step forward for Venus as it means continuing to move towards a more automated and responsive risk management system. The Risk Oracle will offer the protocol:

Real-Time Updates: Implement real-time updates for parameters like supply caps, which ensures that supply caps remain appropriate relative to market demand, preventing over-exposure or liquidity constraints, and maintaining the protocol’s stability and competitiveness.

Automated Adjustments: Automatically updating parameters such as interest rates enables the protocol to maintain a balance between lending and borrowing through dynamic rate adjustments.

Enhanced Market Stability: Dynamically adjust parameters based on real-time data to ensure the protocol remains resilient against sudden market changes.

Resilience: This would further make the protocol more antifragile and less reliant on contributors for providing all updates while still retaining the protocol’s risk and security mechanisms.

Specification

Risk Oracle Integration

Data Source: Venus will read risk parameter recommendations from the Chaos Labs’ Risk Oracle.

Parameter Updates: The Risk Oracle will feed data into the Venus’ protocol, where a Keeper will observe updates, validate them, and execute transactions to update on-chain market configurations.

Control Mechanism: The Keeper will not have direct control over the parameters. Instead, during transaction execution, the Venus contract will read values from the Risk Oracle and use them to update the markets.

Update Frequency

Real-Time Updates: Parameters like supply and borrow caps will be updated in real-time to ensure optimal conditions.

Periodic Updates: Certain parameters will be periodically reviewed and adjusted on a scheduled basis, ensuring the protocol remains aligned with long-term market trends.

Validation and Safety:

The Keeper will automatically check updates within a predefined valid range to ensure the protocol’s safety and integrity.

Initial updates will use narrower ranges for extra security.

Implementation Process

• Initially, the Oracles will have support for supply and borrow cap updates.
• In the future, the Chaos Labs Risk Oracles will also support updates for other risk parameters across the Venus protocol.

Reference

Chaos Labs Risk Oracles https://chaoslabs.xyz/solutions/risk-oracles

Conclusion

Integrating Chaos Labs’ Risk Oracle into Venus will enhance the protocol’s adaptability and resilience by automating real-time adjustments of key parameters like supply and borrow caps, interest rates, and collateral requirements. This integration will improve risk management, optimize liquidity, and maintain competitive rates, ultimately strengthening Venus’ position in the DeFi market while reducing operational complexity.

[Frayst]

Very nice proposal.

Automation is key for Venus! Devs and vanguard teams will be able to spend more time on other things than parameter adjustments, especially with all new markets & networks

[Debbie]

This will improve stability, efficiency, risk management, and overall performance of the protocol. I support this proposal and look forward to its implementation

[DomVSPM]

I really love this proposal, It is a very practical solution and will certainly save the team a lot of cost time.

[C0sty]

Welcome to the automatización era . Nice

[mehmeterkcn]

Great!
I fully support the integration of Chaos Labs’ Risk Oracle into Venus.
Automating risk parameters in real-time will significantly enhance the protocol’s efficiency and resilience, making it more adaptive to market changes. This is a smart move that will strengthen Venus’ position in the DeFi space.

[ChristoWarriorCrypto]

I am fully in favor of this proposal to integrate Chaos Labs’ Risk Oracle into Venus. The real-time automation of key parameters such as supply and borrow caps, along with the automatic adjustment of interest rates, will significantly strengthen the protocol. This will not only improve operational efficiency but also optimize market stability and Venus’ competitiveness. Additionally, the implementation of automatic adjustments will allow for quicker responses to changing market conditions, reducing the need for manual intervention.

I applaud this step toward greater resilience and transparency, with security remaining a top priority. It is an excellent decision to move toward a more dynamic and adaptive protocol, benefiting the entire community. Let’s move forward with the integration!

[Tomm]

Integrating Chaos Labs’ Risk Oracle into Venus is necessary for Venus protocol!

[masamune]

I agree with the overall trend of automatic adjustment of risk parameters.
I would be happy if we can reduce risk and capture demand by quickly making appropriate adjustments

However, I think it is an ongoing issue to be careful with parameters related to liquidation, such as CF and LT, and to further strengthen and thoroughly inform users of these parameters.

[Obacoin]

This ia a welcomed development. The reliability of the oracle is key for defi protocols. Venus being the leading defi protocol can’t be seen to be behind any. I auppoet we go ahead and implenent this as quickly as possible.

[Gregor]

I will always support any idea that is connected to safety. Chaos labs and their recommendations were usually really good. That’s why i believe that risk oracle will be also a good deal to have.

[mopgawka]

I like that Venus doesn’t lose its grip on the safety and reliability of the system. All proposals aimed at strengthening the security position of the protocol should definitely be considered and adopted

[davd.mbt]

Having a responsive system of risk oracles is an important differentiator for Venus.

However, users must be thoroughly notified of any changes to the CF and LT parameters.

[chaoslabs]

Chaos Labs is excited to present its Risk Oracle and the benefits it can bring to Venus. We’re thrilled to see the community actively interested in the details. We’re happy to dive into the specifics below.

Chaos Labs Risk Oracle Overview

The Chaos Labs Risk Oracle serves the purpose of automating the risk management process, which traditionally requires manual intervention. The integration will streamline updating critical parameters like supply and borrow caps, allowing the protocol to be more responsive to real-time market changes. Currently, Chaos Labs has constant monitoring and alerting configured to notify the team of market events, resulting in automated parameter recommendations for the Venus protocol, which are then manually shared with and updated by the Venus team. Introducing the Risk Oracle will not change this workflow but will automate the process, ensuring quicker and more frequent updates with validated recommendations—all without sacrificing protocol safety and integrity.

Automation with Full Control for Venus

It is crucial to emphasize that Risk Oracles do not provide Chaos Labs direct control over the Venus contracts. Instead, our system will automatically publish risk parameter updates to the Risk Oracle contract. Venus’ Keeper will monitor the Oracle, validate these recommendations, and, upon meeting predetermined criteria, execute the updates to the on-chain contract configurations. This allows full control to remain with Venus, ensuring that every update is consistent with safety protocols and governance decisions.

Technical Details

To provide more insight into the technical workings of the Chaos Labs Risk Oracle, here’s an overview of the key steps involved in the process:

1. Simulation & Analysis: The Chaos Labs Risk Engine continuously runs a range of simulations using data from various sources, including on-chain data, CEXs, DEXs, and other relevant market indicators.
2. Risk Parameter Identification: Based on the simulation results, the Risk Engine identifies necessary updates to market risk parameters. These parameters could be anything from supply and borrow caps to interest rates.
3. Publishing to the Risk Oracle Contract: Once a parameter update is identified, Chaos Labs’ system automatically publishes this update to the Risk Oracle contract on-chain via the publishRiskParameterUpdate() function. At this point, we store metadata such as the new parameter values, a unique update ID, the relevant market, and other identification fields.
   • The Oracle’s contract function structure has been designed to be highly flexible, enabling it to support various data types and parameter complexities. This flexibility is crucial in maintaining accurate and real-time adjustments to Venus’ markets.
4. Event Emission: Upon publishing, the contract emits a ParameterUpdated event, which signals that a new recommendation has been sent for validation. Venus’ Keeper, which listens for this event, takes over from here.
5. Validation by Venus Keeper: Venus’ Keeper fetches the latest update details using the contract’s getLatestUpdateByParameterAndMarket() function. The Keeper then runs a validation check against predefined bounds and conditions set by Venus. Only if the new value falls within an acceptable range and meets other safety criteria does the Keeper push the update to the Venus contract’s configuration.
   • Because all parameters are validated by the Keeper before implementation, this ensures that no unauthorized or harmful changes are enacted, adhering strictly to Venus’ governance and security policies.
6. Implementation: Once validated, the updated parameter is applied to the relevant market on-chain, ensuring that Venus remains optimally configured based on real-time market data.

Implementation and Proven Track Record

The implementation process will follow a phased approach, initially focusing on specific parameters like supply and borrow caps, with subsequent support extended to more areas in the future, like interest rates and others. These enhancements are aimed at facilitating more precise conditions by dynamically adjusting market parameters based on data from global markets.

Furthermore, it’s worth noting that we’ve already successfully implemented similar Risk Oracle solutions for other major DeFi protocols.

Conclusion

We believe that integrating the Chaos Labs Risk Oracle will significantly benefit Venus by enabling more agile and automated parameter adjustments, reducing the reaction time to market changes, and enhancing protocol resilience. We’re excited to work together to make Venus more responsive, competitive, and secure for all its users.

Please feel free to reply with any additional questions or concerns.

The Chaos Labs Team