Probably the best post-mortem I have seen in an extremely long time.
TLDR: A tokenised credit fund (Fasanara One) had a 2% write down and nothing broke. No liquidations and no bad debt because the curators did an immaculate job.
Truly an impressive glimpse of how DeFi and TradFi are merging. I read the First Brands story recently and I had no idea it was going to spill into DeFi.
Few things to say about this post and how Steakhouse handled it:
* We should normalise realised losses due to credit risk. Currently bad debt is a taboo subject in DeFi, but as we mature this is normal and expected (bad debt in this case means writedown)
* Despite the drawdown, the strategy is still up for past 5 months (important that this was not advertised as a yield bearing stablecoin, but a credit fund)
* Well chosen risk parameters anticipate such drawdowns so that the loss (if any) is eaten by loopers, rather than lenders.
* Steakhouse had skin in the game - Invested in the fund to receive all the documentation and regular updates.
* Risk management works best when curators focus on their specialisation - from dd, underwriting, oracle choice, liquidation parameters, risk parameters and communication.
Much respect to Steakhouse for handling this end to end, transparently and professionally.
This is why we work with them.
twitter.com/y2kappa/status/199...
