This section showcases the results of the risk assessment methodology and analyses the results for each of the assets considered.
Asset Risk Map
The risk assessment methodology applied to our historical data computes the following risk ratings per asset.
Risk Analysis per Asset Stablecoins
BUSD is one of the latest stablecoins launched by a partnership between Paxos, expert in stable coins, and Binance, one of the biggest exchanges and a major player in the industry.
BUSD Smart contract Risk: B
The BUSD contract launched in September 2019 has a completed $3.8 billion in total transactions. BUSD is one of the most traded dollar-backed stablecoin. Multi-Chain Lend (MCL), being a fork of Aave, has performed a thorough verification of the smart contract that appears identical to the PAX smart contract launched in September 2018 with nearly a million transactions.
BUSD Counterparty Risk: B-
BUSD is backed by real USD. The administrative features are explicit with Paxos as custodian and issuer. A monthly audit attests to the consistency of the USD bank reserves versus the on-chain supply of USD. Finally, BUSD is compliant and has been approved by the New York State Department of Financial Services (NYDFS).
BUSD Market Risk: B
The market capitalisation is quite high with a fast growth these last few months. The trading volume for BUSD has picked up with around $350 million a day, mostly but not limited to Binance. As a stablecoin backed by USD, the volatility is very low. Still, since the smart contract is so recent, BUSD cannot be used as collateral at present time.
BUSD Counterparty Risk: B-
A monthly audit attests to the consistency of the USD bank reserves versus the on-chain supply of USD. Finally, BUSD is compliant and has been approved by the New York State Department of Financial Services (NYDFS).
BUSD Market Risk: B
The market capitalization is quite high with a fast growth these last few months. The trading volume for BUSD has picked up with around $350 million a day, mostly but not limited to Binance. As a stablecoin backed by USD, the volatility is very low.
DAI is the first decentralized stablecoin built on the Ethereum network. It is minted by creating a Collateralized Debt Position (CDP) and staking a certain amount of ETH. Every CDP must be overcollateralized by at least 150% of the minted DAI. Below this threshold, the CDP gets liquidated.
DAI Smart contract Risk: B-
DAI is active since December 2017 and has remained fully operational. In November 2019 the contract has evolved for DAI to hold a basket of currencies instead of just Ethereum. Given its wide use in the DeFi space, the contract already holds over 2 million transactions which mitigates the risk rising from its young age.
DAI Counterparty Risk: C
DAI is the stablecoin of Maker DAO which has been functioning efficiently since inception. Anyone can mint DAI by opening a CPD. The Maker team also has some control over the minting. Following the Black Thursday crash of March 2020, there was some deficit in the backing of DAI which required the minting of additional MKR. Additionally, there are some concerns related to the centralization of the price feed, with oracles failing to keep the prices up to date during the said Black Thursday.
DAI Market Risk: B
DAI has $940 million market capitalization with over $110 million of average daily volume spread across the top exchanges. It has been robust throughout its whole life, sustaining multiple ETH price drops. The volatility is low, yet the DAI peg suffers regularly from high demand. Additional collaterals are since been added, among which USDC to stabilize the price.
USDC is primarily promoted by Coinbase and supported by the CENTRE consortium. Together with DAI, it has been the most used stablecoin in the DeFi ecosystem following a strong push from Coinbase who provides liquidity to projects.
USDC Smart contract Risk: B+
USDC has only been active since September 2018 with more than 7 million transactions.
USDC Counterparty Risk: B
As it’s backed by real US dollars, USDC is centralized. The technology to mint new USDC and hold the backed USD is based on a legal framework. It is currently maintained by the CENTRE consortium which is a trusted entity in the ecosystem. Furthermore, USDC is the first regulated cryptocurrency bringing a lot of legitimacy to the space. Still, the infrastructure is based on the Ethereum blockchain where regulators have little power.
USDC Market Risk: A-
There is a high trading volume for USDC reaching over $800 million a day, with many pairs in multiple exchanges and a high market capitalization. The token is used in multiple DeFi platforms both as collateral and principal. USDC is a stablecoin backed by real USD leading to low volatility.
Tether is the oldest USD backed stablecoin. It initially started as an independent currency built on the Omni blockchain, and progressively moved on the Ethereum blockchain, presumably to take advantage of the DeFi ecosystem.
USDT Smart contract Risk: A-
USDT is the first stablecoin in operation since November 2014 and on this Ethereum contract since November 2017. With nearly 73 million transactions, USDT is one of the most used coins.
USDT Counterparty Risk: B-
Tether is centralized, fully controlled by Tether Limited, which is in turn controlled by BitFinex. It is most traded stablecoin with a total market capitalization of $16 billion.
USDT Market Risk: A+
USDT is widely available in different exchanges and is the stablecoin with the highest volume. The value of USDT is stable around 1 dollar as it is backed by USD.
One of the oldest cryptocurrencies with hundreds of thousands of projects developed on the Ethereum blockchain. A majority of decentralized applications are also based on Ethereum and the cryptocurrency accounts for the highest percentage of the total funds staked in DeFi projects.
ETH Smart contract Risk: A+
Ethereum is among the oldest cryptocurrencies ranking number 2 in terms of market capitalization. It has a large and committed community as demonstrated by the 880 million transactions conducted.
ETH Counterparty Risk: A+
Ethereum is the most diverse ecosystem of digital currencies with nearly 100 million holders. There are many organizations that are dedicated to pushing the ecosystem further and decisions are community based.
ETH Market Risk: A-
Ethereum has among the highest market capitalization and trading volumes of digital currencies. Ethereum’s price has been rather volatile in 2019, and prices of tokens on its ecosystem tend to be correlated (except stablecoins).
Bitcoin is the largest cryptocurrency measured by market capitalization and the amount of data stored on its blockchain. The current market capitalization of Bitcoin is US$242 billion.
BTC Smart contract Risk: A+
Bitcoin is among the oldest cryptocurrencies ranking number 1 in terms of market capitalization. It has a large and committed community as demonstrated by the 581 million transactions conducted with a total of transacted value of more than US$1 billion.
BTC Counterparty Risk: A+
Bitcoin is one of the earliest cryptocurrency to meet wide spread popularity and success. It was created in 2009 by Satoshi Nakamoto. It has one of the most diverse ecosystem of digital currencies with more than 50 million holders.
BTC Market Risk: A-
Bitcoin has the highest market capitalization and trading volumes of digital currencies.
Multi-Chain Lend (MCL) Protocol is developed on the Binance blockchain, making it fully dependent on Binance’s reliability. bMXX and all the currencies presented are part of the Binance ecosystem.
BNB Smart contract Risk: B+
BNB is ranked number 7 amongst the cryptocurrencies in terms of market capitalization. The current market capitalization is US$4.4 billion and it has a large and committed community as demonstrated by the million transactions conducted.
BNB Counterparty Risk: B+
BNB is a ERC20 Ethereum coin first issued by Binance Exchange in 2017, which may be traded for other cryptocurrencies over the Binance Chain. The latter supports the entire Binance DEX (or exchange) and allows for digital assets to be issued and exchanged without centralization. The platform provides a means of transferring the Binance Coins which exist within the Ethereum network to the Binance Chain. Gradually, Binance buys BNB in order to carry out the token burning necessary to remove more and more of it from circulation and ensure the asset continues to increase in value. Half of the total supply of BNB will eventually be destroyed that way.
BNB Market Risk: B
BNB is among the top 10 highest market capitalization and trading volumes of digital currencies. It is the native token of Binance Exchange, the world’s largest and most popular cryptocurrency exchange with daily transaction volume of more than US$6 billion.
ChainLink is a protocol that aims to provide a base infrastructure for decentralised oracles. The goal is to allow contracts to fetch data from the real world in a decentralised, tamper-proof manner. Multi-Chain Lend utilises Chainlink price oracles to power its operations.
LINK Smart contract Risk: B+
ChainLink has been active since 2017 deploying this smart contract in September. Its adoption has boomed in 2019, driven by the reliability of its oracles, with now over 6 million transactions.
LINK Counterparty Risk: B+
ChainLink is non-custodial and open source, with nearly 300,000 holders, hence presents low centralisation risk.
LINK Market Risk: B+
LINK has become increasingly relevant becoming one of the most successful Ethereum projects. It is widely available on exchanges and increasingly popular on DeFi platforms. The trading volume is very high. LINK’s price has seen a sharp increase in 2020 and we can anticipate that the volatility will continue.
Cardano is considered third-generation crypto and is building a proof-of-stake (PoS) blockchain network, being developed into a decentralised application (DApp) development platform with a multi-asset ledger and verifiable smart contracts. Based on peer-reviewed academic research, Cardano is working towards building a blockchain that is viable for real-world applications, by making it scalable, interoperable and sustainable.
Cardano Smart Contract Risk: C
Cardano Smart Contracts are not launched yet. Once compete, this will allow the creation of fungible and non-fungible tokens, support for the creation of new cryptocurrencies on Cardano as well as the tokenisation of many types of digital and physical assets, as well as easier integration of smart contracts and DApps involving multiple cryptocurrencies.
Cardano Counterparty Risk: B
The majority of nodes are run by network participants making Cardano more decentralised and enjoying greater security and robustness as a result. They have introduced delegation and incentives scheme and a reward system to drive stake pools and community adoption.
Cardano Market Risk: B+
While the market capitalisation and volumes of Cardano are very high, the volatility persists as Cardano makes a run-up ahead of its much anticipated smart contracts launch.
Polkadot is an open-source multichain protocol that facilitates the cross-chain transfer of data or asset types, not just tokens, thereby making a wide range of blockchains interoperable with each other. It seeks to establish a fully decentralized and private web, controlled by its users, and simplify the creation of new applications, institutions and services.
DOT Smart contract Risk: B+
DOT is active since October 2017 and has remained fully operational. Its adoption has boomed since 2020, driven by its ability to connect blockchains and allowing them to interact, with now over 4 million transactions.
DOT Counterparty Risk: A-
Polkadot’s mass interoperability through a set of common validators helps to secure its multiple blockchains and allows them to scale their transactions by spreading their data across many parachains. The network uses the NPoS (nominated proof-of-stake) mechanism to select validators and nominators and maximize chain security. This unique validity scheme enables chains to interact with each other securely under the same rules, yet remain independently governed.
DOT Market Risk: A-
DOT has a market capitalization of $38 billion with more than 1 billion average daily volume spread across the top exchanges.
Litecoin (LTC) was designed to provide fast, secure and low-cost payments by leveraging the unique properties of blockchain technology. The cryptocurrency was created based on the Bitcoin (BTC) protocol, but differs in terms of hashing algorithm used, hard cap, block transaction times and low transaction fees.
LTC Smart contract Risk: A-
Litecoin is one of the most widely accepted cryptocurrencies, with more than 2,000 merchants around the world accepting it. It has been active since 2011, accounting for more than 65 million transactions.
LTC Counterparty Risk: A
As a blockchain-based cryptocurrency, Litecoin is secured by incredibly strong cryptographic defences. It uses the Proof of Work (PoW) consensus algorithm to ensure transactions are confirmed quickly without errors. The combined strength of Litecoin mining network prevents double-spending and a range of other attacks, while ensuring the network has 100% uptime.
LTC Market Risk: B+
Litecoin is one of the oldest digital currencies with a total market capitalization of more than $15 billion, average trading volume of more than 2 billion and it is widely traded in over 300+ exchanges.
Bitcoin Cash is a Bitcoin hard fork advocating for and building towards a literal interpretation of Bitcoin as a "peer-to-peer electronic cash system".
BCH Smart contract Risk: B+
BCH is a fork from BTC, the oldest cryptocurrency ranking number 1 in terms of market capitalization. The protocol has been upgraded multiple times, transaction more than 300 million since 2017 and has been adopted by more than 2500 merchants globally.
BCH Counterparty Risk: A-
BCH is permissionless and has more than 16 million holders. In addition to pursuing on-chain scalability through larger block sizes, Bitcoin Cash prioritizes fast-paced development of technological improvements in opposition to the more conservative philosophy of Bitcoin. Given such, Bitcoin Cash has planned network upgrades every six months.
BCH Market Risk: B
Bitcoin cash has more than $15 billion in market capitalisation with an average daily trading volume of $6 Billion, making it the 11th largest crypto asset.