1/ As the DeFi pot grows, so too will attacks. DeFi needs better risk management to avoid catastrophic setbacks.

We drafted an idea called Guarded Launches: a set of best practices to get to mainnet quickly while keeping control of risk and scale.

https://medium.com/electric-capital/derisking-defi-guarded-launches-2600ce730e0a

2/ Guarded Launches are inspired by Canary Deployment, used by teams at Google, Facebook, Amazon, etc. to deploy new code while protecting critical systems.

Start small and grow scale + risk in a controlled manner. Build risk management directly into your development processes.

3/ DeFi can adopt a similar strategy --

a/ configurable parameters to new systems that limit the risk and scale taken on at launch
b/ As users and devs gain confidence, use governance processes to relax controls and unlock scale.

We call this a Guarded Launch.

4/ What type of limits could work?

10 ideas:

- asset limits
- asset type limits
- user limits
- usage limits
- composability limits
- escrows
- insurance ratios
- LTV ratios
- circuit breakers
- emergency shutdowns

The right controls depend on the system. Simpler is better.

5/ Some of these ideas are familiar, others are new. Popular projects including @MakerDAO, @compoundfinance, and @UniswapProtocol already use some of these ideas in their designs.

We compiled the best in the hopes that the full set of techniques becomes standard practice.

6/ Going meta, there could be infra to make it easy to do Guarded Launches. A small, vetted codebase could be shared across many projects to implement these controls.

Guarded Launches will become as widely adopted as code audits are today.

7/ Now is the time to start thinking about risk management, before DeFi becomes permanently associated with weak processes and stolen funds.

If you are working on new DeFi products or thinking through risk controls for DeFi, we'd love to chat. DMs are open.

8/ Thanks to @tomhschmidt, @dberenzon, @delitzer, and the @ElectricCapital team ( @avichal, @jubos, and @mariashen) for their feedback and suggestions.