Liqwid x Credmark R&D on Loan Risks

The Credmark team are DeFi experts and have worked extensively in developing risk-adjusted models for Ethereum DeFi lending protocols (Aave)

Credmark has built an open DeFi platform to allow users to input lending/borrow transaction data and output reliable risk-adjusted metrics.

Liqwid Labs is developing an open source and non-custodial liquidity protocol for earning interest on Cardano native assets and borrowing assets.

Credmark provides decentralized financial institutions with the tools they need to lend to customers with trust and confidence outside of traditional lending mechanisms. By being decentralized, Credmark makes credit data and analysis open and provable.

MLabs Haskell developers have been selected as one of the software firms working with the IOHK Plutus delivery team on the private testnet. The developers have also committed to training other Haskell devs and producing open source DeFi tooling to open up Cardano DeFi development to non-Haskellers.

Our teams are partnering on this proposal and focused on two major activities:

1. Analyze, model and simulate a defaulting borrowers risk to the protocol and the ensuing liquidation (3rd party repays borrowers loan to suppliers) workflow to mitigate the default risk.

2. Develop a pooled liquidation contract prototype in Plutus representing the workflow of a Liqwid safety module contract users deposit funds into to participate in pooled liquidations of an underwater borrowers position and repaying the suppliers in that market (similar to the Aave safety module:https://docs.aave.com/aavenomics/safety-module).

To learn more about the Credmark team check out their Fund3 proposal to develop a credit scoring model for Cardano DeFi users here: https://cardano.ideascale.com/a/dtd/Cardano-Algorithmic-Credit-Scoring/334490-48088

To learn more about Liqwid and our recent development updates:
https://www.youtube.com/watch?v=JhO5iC08xSA

# MLabs work on Open Source Haskell:

Across our team we have initiated and contributed to many open source projects, including static and JIT compilers (Cython, Numba), Haskell data processing systems (Streamly), build systems and frameworks for Purescript (Spago and Parcel), front-end frameworks (Halogen), Haskell schema validators (Medea), database libraries (beam, beam-mysql), Redis bindings (Hedis), the Nix and Haskell build system and packages (nixpkgs, cabal-extras), string and string parsing libraries (text-ascii, io-streams-ascii, bytestring-lexing), metrics and monitoring libraries (prometheus-haskell) and many more.
Some of the libraries we have developed are actively used as part of existing payment stacks and payment processing systems.

https://github.com/mlabs-haskell/liqwid-contracts/
https://github.com/juspay/beam
https://github.com/juspay/mysql-haskell
https://github.com/juspay/hedis
https://github.com/juspay/bytestring-lexing
https://github.com/juspay/medea
https://github.com/juspay/medea-ps
https://github.com/kozross/text-ascii
https://github.com/kozross/io-streams-ascii
https://github.com/purescript/spago
https://github.com/purescript-halogen/purescript-halogen
https://github.com/NixOS/nixpkgs
https://github.com/cython/cython
https://github.com/numba/numba

# Development team

3 senior Haskell fullstack developers for the Liqwid team

3 full time equivalent (FTE) data analysts from the Credmark team

# Metrics/KPIs:

1. Number of risk models developed for simulating Liqwid's default risk and liquidity crunch scenarios.

2. Number of prototype Plutus liquidation contracts developed to simulate pooled liquidations in Liqwid markets.

# Deliverables

1. Within 2 months of receiving the funding we will release the initial analysis, modeling and simulation of Liqwid's default, liquidity and market risks, with the plan to iterate on the model(s) in a collaborative team environment comprised of the Liqwid Haskell dev team working with Credmark DeFi data analysts and the Cardano DeFi community leading up to Liqwid v1.0 launch. All technical documentation generated will be made public.

2. Within 2 months of receiving the funding we will release the prototype pooled liquidation contract in Plutus to simulate a safety module contract executing pooled liquidations at scale to secure the protocol from default risks and repay the suppliers of a market in the event borrower(s) become insolvent. A production version of the prototype pooled liquidation contract will be released as the Liqwid Safety Module in v1.0 on Plutus mainnet when the protocol is launched.

All of the code developed will be open sourced under the Apache 2.0 License.

# Relevant Experience

We are the protocol architects and maintainers of Liqwid Protocol, the team is composed of Cardano veterans and domain experts in financial auditing, asset/risk management, IT/devops and Haskell. Liqwid Labs is a software development startup focused on building open finance solutions on Cardano. Together we've aligned around a vision to implement a more efficient and secure set of lending products, by the people, for the people.

Credmark are a team of DeFi experts who build risk-adjusted models to simulate liquidity, default and other emergent risks in Ethereum DeFi protocols. The team also produces industry-leading research into the crypto credit/lending space each quarter.

MLabs Consulting has worked extensively in the fintech and payment space, and is now embarking on a new journey into the decentralized finance space. Their clients include Juspay and Tillit, which respectively are B2C and B2B payments companies in India and Europe.

At Juspay the MLabs team heads up the migration of the payments stack from Purescript to Haskell and the migration from Groovy to Haskell. At Tillit the MLabs team helps to build the backend systems for B2B payments, and the associated DevOps. Work on other projects includes front-end development, artificial intelligence and machine learning.

# Budget

The total budget for the two listed deliverables and costs including VAT:

75 engineering hours - Analysis of Liqwid Default and Liquidity Risks

75 engineering hours - Plutus Pooled Liquidation Contract Prototype

Fixed cost for this work which is composed of developer's salary, accounting/taxes and VAT: $25,000