In this episode of CryptoCurrents, Leonard Kim returns as host to talk with Alex Hoffman, Head of Ecosystem at Superposition Finance, a company setting a new standard in decentralized finance (DeFi) by focusing on innovative risk assessment models.
Starting his career with entrepreneurial ventures in various sectors, including furniture and healthcare, Hoffman leveraged his diverse experiences to uniquely position himself in the crypto finance sector. His journey from active participation in Solana hackathons to significant roles in projects like Nirvana eventually led him to his current role at Superposition Finance, where he aims to bridge critical gaps in DeFi risk management.
But how does Superposition Finance distinguish itself from conventional DeFi platforms? By deploying advanced risk models originally developed for traditional finance (TradFi) to the volatile world of cryptocurrencies.
Superposition Finance’s approach brings institutional-level risk assessment to DeFi, enhancing capital efficiency and safety for investors. And unlike typical models that offer static and crude valuations of collateral, Superposition utilizes a dynamic value-at-risk model that provides a holistic assessment of a user’s portfolio, considering both assets and liabilities.
Using its model, Superposition creates more nuanced risk assessments that accommodate the unique behaviors of different cryptocurrencies and their interrelations. It adapts in real-time to market conditions, thereby reducing unnecessary liquidations and improving the overall stability of the financial ecosystem on the platform.
For instance, during market downturns, Superposition’s model adjusts the valuation of collaterals like APT (Aptos tokens) in a way that minimizes unnecessary liquidations, maintaining higher capital efficiency than other platforms.
The core of Superposition Finance’s innovation lies in its oracle, a “super oracle” constructed to gather and synthesize an extensive range of data far beyond the capacities of existing oracles. This system integrates price data with market depth and other critical financial metrics to support its sophisticated risk models.
“To do a risk model properly, you need 180 days,” says Hoffman, pointing out that ups and downs are because there is some sort of “event that triggered some crazy spike.” He continues, “But that doesn’t mean that everybody should be liquidated, which is what happens typically.”
The depth of data is crucial for understanding market behaviors and ensuring that the platform’s financial operations reflect accurate and fair market conditions, especially during volatile periods.
Moreover, Superposition’s approach includes a forward-thinking focus on collateral management across different blockchains, emphasizing the importance of keeping assets in their native environments while leveraging them across the ecosystem. Not only does the unique method enhance security, but it also optimizes capital efficiency by enabling users to borrow against correlated assets without transferring them between chains.
As DeFi continues to evolve, Superposition Finance is actively expanding its offerings to include new features like the “multiply feature,” which allows for significant leverage opportunities within the ecosystem. They are also developing something built on top of what was originally called Concordia, which is the risk layer.
“And I can’t talk about this too much either, but we’re gonna be leveraging what Concordia is doing, which should make us, like, far and above beyond not just what’s going on in DeFi right now,” remarked Hoffman.
In essence, Superposition Finance is not just another DeFi platform but a pioneer in integrating sophisticated, TradFi-derived risk management models with the innovative potential of decentralized finance. This integration promises to make DeFi more accessible and secure for both seasoned investors and newcomers, paving the way for more widespread adoption of crypto-financial technologies.
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