What is DeFiScan?

The maturity of DeFi technology progresses through several stages characterized by different degrees of decentralization. Upon deployment, DeFi protocols often expose critical risks from central dependencies and permissions controlled by centralized operators. As the protocol matures, these risks are eliminated e.g. through the introduction of fallback mechanisms, Security Councils and exit windows. To date, however, these stages have not been formalized resulting in a lack of transparency around the maturity and related risks of DeFi protocols.

DeFiScan offers a framework formalizing the decentralization stages of DeFi technology and allowing, for the first time, to assess and monitor the technology's maturity in a verifiable manner. This framework consists of two parts:

  • A centralization risk scoring system based on a scale of "High", "Medium" and "Low" severity risks
  • A formalization of the decentralization stages which relates directly to the risk scores achieved by a DeFi protocol

Here we provide an overview of the framework. For a more detailed discussion, please refer to the introduction blog post.

DeFi Centralization Risks

DeFi Stages Framework

Security Council Requirements

A Security Council can represent an effective intermediate step of decentralized control over permissions that cannot be revoked or protected with an Exit Window. In particular, a Security Council enables a protocol to mitigate risks of centralized control over such permissions and enter Stage 1.

Any multisig account with the following minimal requirements is an acceptable Security Council setup:

  • At least 7 signers
  • At least 51% threshold
  • At least 50% non-team signers
  • Signers are publicly announced (with name or pseudonym)