Onchain monitoring: what it means for trading and risk teams

TL;DR: Trading firms exposed to DeFi protocols can lose or preserve far more from reaction speed than from the exploit itself, because monitoring must surface depegs, liquidation risk, and hostile protocol changes early enough to act, according to Blockaid. The governance gap is not visibility alone, but decisionable visibility tied to the desk’s own response path.

Editorial analysis by NHI Mgmt Group, based on content published by Blockaid: “Onchain Monitoring for Trading Firms: Real-Time Risk Visibility for Capital Deployed Onchain”.

Key questions

Q: What should trading firms do first when a protocol they are exposed to changes risk state?

A: They should determine whether the change affects a position they actually depend on, then decide whether to exit, rebalance, or hold.

Q: Why do identical DeFi positions produce different losses on the same incident?

A: Because the control is not the position itself, but the speed and quality of the response around it.

Q: What breaks when onchain monitoring does not see protocol state directly?

A: Delayed or indirect monitoring lets liquidation, depegs, and hostile control changes arrive before the desk recognises them.

Practitioner guidance

• Map dependency chains beyond the seed asset Track the contracts, pools, oracles, and backing assets that sit several hops out from each position so the inventory reflects actual exposure, not only direct holdings.
• Create block-level monitors for lending health factors Read protocol state directly from the chain and re-evaluate positions on each block so liquidation risk is detected before off-chain reporting catches up.
• Separate informational and action-trigger monitors Treat routine event watches, such as supply notifications, differently from exploit or privileged-change alerts so the desk knows which signals require immediate unwind logic.

Bottom line: DeFi monitoring is an exposure control because desks usually cannot change the protocol, only how quickly they recognise and exit from it.

Explore further

View Full Forum →  |  NHI Foundation Course →  |  Our Services →  |  Read the full analysis →