Hey @tom, that’s a good timing to come back on this proposal, as Fuse will pass the 3-month activity in 3 days, one of the requirements to move a strategy in production. That’s a good sign, a longer track record corresponds to a higher risk score of the network. Regarding the TVL metric, the protocol still has $30m TVL and is far from the required $50m. This missing point generates a security alert and blocks the Governance to move to the next step.
Furthermore, a bad debt event occurred on Cream protocol, demonstrating the need for further security measures in the Integrations Standard Requirements.
That accident created $1.3m losses, but the final damage is worth $7.5m. This event happens when collateralized assets do not have enough liquidity to cover high price falls and the protocol can not liquidate the loans, resulting in lenders that own worthless tokens.
The more illiquid assets are listed, the higher is the probability to suffer from accidents like this.
While Cream already anticipated that bad debt will be covered by reserves (that amount to $7m according to this report), if the same event would happen in low-TVL protocols like Fuse there are fewer guarantees to cover those losses.
That’s why the journey is not so straightforward and having some good metrics is not enough to cover potential bad events.
In this case, the Governance will move the strategy in production once RAI, Cream, and Fuse reach all the required parameters listed in the Integration Standard Requirements. This conservative approach ensures that the protocol respects the safety criteria. Until that time, it lives in the beta stage, where users can experiment on strategies in testing phase (with extreme caution), and accessible through third-party integrations like Yearn.