Catching the Rug Before It Pulls: Using AI Proactively to Mitigate Risk for DeFi | ETHTaipei 2026

Oh, thank you, Hannah. Cool. Uh yeah, my name is Danger, and today I'm going to teach you how to use DeFi safely. Um yeah, so uh who am I? Uh I am a professional DeFi farmer, so I've been farming since 2020, and I have a media called Today in DeFi, and we do a lot of DeFi research, which informs our uh farming, basically.

We do risk research, and we also do alpha research, so we find good farms. Okay, so why do why pay attention to risk? Why do you risk research? Uh as everyone knows, like AI has been accelerating hacks and exploits, so this year there's been um over a billion dollars lost in um in uh asset exploits. So, compared to previous years, one kind of interesting thing is that um even though there's been a lot of AI involved, but most of the hacks and losses this year have not been like smart contract exploits as much as um things like teams getting hacked, so that was like USR, and um also counterparties running off with your money.

So, in the case case of Stream Finance, a trader lost a bunch of money off-chain. Yeah, so uh basically, the the moral of the story is that risk risk research can save you a lot of money. So, uh what is the what are the essential principles of risk research? And I think there's two big assets this year which really demonstrate the two major principles. One is Stream Finance.

So, Stream Finance was this tokenized hedge fund where uh this guy called 0xLaw just took your money, and then um he did advanced degen yield farming with it, and part of the strategy was actually on-chain, and you could verify that, but part of the strategy was not on chain, it was off chain. He lent some money to a trader who was doing like centralized exchange trading with it, so you couldn't verify it. So, Stream showed and that trader lost his money and then even though the on-chain component was fine, but the off-chain component that you couldn't verify just, you know, went belly up and that showed that, you know, you have to verify assets end-to-end and make sure you know where all the money is. DUSD is really interesting cuz DUSD is from a protocol called Elixir and DUSD started out as a really relatively straightforward asset, a basis trading coin similar to Athena. So, if you had deposited into Elixir in the beginning when it was still a basis trading coin, that would have made a lot of sense cuz it's just like, you know, they launched after Athena, Athena already proved the concept and it's just very simple risk profile.

But, as the market turned down, as the funding rate came down and you know, basis trading wasn't good anymore, Elixir, they pivoted to also lending Stream some money to earn some extra yield in the down market. And what Elixir shows us is that you can't just do initial DD, you can't just look at the asset in the beginning and think everything's okay. You have to actually pay attention to it over time, you have to continuously monitor it. Okay. So, our first asset um after we saw these these asset rugs, basically, we we started doing more on-chain verification and risk analysis.

And one of the assets that we started farming soon after Stream and DUSD came down was this asset called THBL. And THBL is a really interesting asset because we looked at it at first and it just looked amazing. It's like this T-bill wrapper and a T-bill is basically US government debt. So, it's probably like it's like the highest quality collateral that you can have. THB was also uh working with established regulated entities.

So, there the tokenizer, the uh the issuer, the um the people actually redeeming the funds were all established Singapore regulated entities. So, on paper it's a very good asset. And at the time we were farming it because the the Pendle PT wrapper was paying uh 12%, which sounds insane these days. But uh back in 2025 at this time, airdrops were really popular and 12% was actually not that unheard of amongst uh airdrop protocols like uh THB. Um so, we farmed this and we were super happy.

Uh we were earning like 30% because we were looping it, and everything was was good at first. And then we were monitoring So, we monitor all our farms, and we noticed that the P&L was actually worse than we expected. So, we looked into it, and we were monitoring the the borrow rates, and it wasn't because we were paying too much borrow. The lending markets were were working fine. But the the peg, the price of THB was was dropping.

And that's really weird because like T-Bills should be extremely good collateral. This is a very good asset. And this asset also had redemptions with regulated financial financial institutions. So, for any smart participant, if you're if you can buy an asset at like 90 cents and you can redeem it and get a dollar, you're going to do that, and you're going to arbitrage that asset back to the peg. But when when we did on-chain analysis, and we looked at the peg versus where it should be, the NAV, we found that THB was not trading where it should have been.

Um so, we found that really funny. So, on this chart you can see the yellow bubbles are where redemptions are happening. And then uh yeah, you have the price chart there. So, green is when the asset is uh at peg or above. Yeah.

Okay. So we looked into it more, we did more on-chain digging and talking to people and everything we found was was kind of stinky. So we tried to apply for KYC. So basically you have to KYC to redeem. So we applied applied for that.

No answer multiple times. We went to Discord and the team was completely unresponsive to any questions about the peg. They just Yeah, it was really weird. And we found that we did try the redemptions. We saw that they happened, but they just didn't happen at a pace that would make sense for this kind of asset when it's under the peg.

And we we so we also we talked to people and we asked around and we found that there were actually redemption terms and stuff, but they weren't public publicly disclosed. So there was there was fees on redemptions and there was also limits on how much you could redeem. And the fees are not weird on a redemption asset, but they weren't disclosed and yeah, it was just really weird. So we just got out of that asset. And then it was a good idea because today it's trading like 2% off peg.

So yeah. So what are the lessons from TH bill? There there's a few lessons. One is that you actually for a lot of assets which are not like a stable coin. A stable coin you can just check is supposed to be at $1.

But for a lot of assets unless you're paying attention, you may not realize it's off peg. Like you you need to actually calculate the NAV. So risk dashboards like the ones we do at TID research can help with that. And also so one major point of this talk is that AI besides you know creating a lot of hacks, you can use it to protect your portfolio by doing risk research, by monitoring your portfolio. But you can't just ask AI to like you can't just one shot that kind of thing cuz risk research is still really a proprietary per asset.

So TH bills a T bill wrapper, but other assets like syrup is a loan book that you have to look at. You know, Athena has some basis trading. So every asset is a little bit different whether you're working with your AI or whether you're creating a risk report dashboard. You actually have to have a human in the loop who understands what's going on. Yeah.

And yeah, check before you enter, check again because these assets can change over time. Yeah, so there are what can you use? You can either build your own but it's extremely time intensive. So for asset risk where we kind of specialize in asset risk. I'm a D5 expert.

We have a like Tradfi people on our team so our financial risk is pretty good. So you can go to TID research for asset risk. If you want to know if a protocol is safe, we actually do some protocol analysis but we're not smart contract auditors so we defer to we think that Yern has pretty good risk ratings and also another site called Filidor. And if you want to if you're depositing into a vault you want to see if a curator is any good, you can check Cradora or Filidor. And this is one of our this is our risk reports page.

So you can either dive into these reports and get more information or you can um just see the overall scores. So if you're like really in a rush you can just look at the overall scores. It's one to 10 and the we're pretty conservative so very high quality stablecoins like PiUSD or RLYUSD USDC they're around seven or eight. Seven or eight is like quite safe. Six is also pretty good.

I would say for most people you should you can start farming around five. Like five is as low as most people should go. Five it means that it's like pretty good, but you should check it weekly. And then if you really want to get like high yield, you might go down to four, but you're going to have to check your asset like on a daily basis, have some monitoring set up. Uh our So reports look like this.

We judge on six different axes. Besides stability, we also have liquidity. Dependencies are kind of a big deal. So like uh for asset uh if you're looking at something like APYUSD, you also need to look at the backing asset STRC. And also you have to look at as MSTR.

So we do that kind of thing. Yeah. And then contract admin is like access control. This is our dashboard. So um basically the point of having reports and dashboards is that reports are kind of like a overall uh overview of an asset.

It's a little bit more static, a little bit more subjective. Um and then for dashboards, this is like uh So reports we update weekly. And then for dashboards, the data is mostly updated hourly. So you can check the peg, the backing, the liquidity, um yeah, so on. Yeah, that's mostly it.

So the asset you farm today may not be the one you entered with. So use risk reports, use dashboards. We have a lot at TID research. We can also help with uh like portfolio tracking and monitoring and alerts. So yeah, if you need any of that, just let us know.

Yeah, that's it. Cool.

Hi. Thank you, Danger. Thank

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