TEPS Standard
Tawf Ethical Protocol Standard - A framework for ethical DeFi capital allocation
What is TEPS?
The Tawf Ethical Protocol Standard (TEPS) defines 4 compliance dimensions for evaluating decentralized finance protocols. TEPS rules are encoded directly into Mandate NFTs and enforced automatically through smart contracts and AI-powered oracles.
TEPS enables capital to flow according to ethical principles rather than purely profit-driven metrics. When a protocol violates the TEPS rules encoded in your Mandate, your capital cannot be deployed to that protocol.
The 4 TEPS Rules
1. Leverage Control
allowLeverage
Determines whether leveraged trading and borrowing positions are permitted.
Capital restricted to protocols without leverage or short positions. Lower risk, sustainable yield focus.
Capital may be deployed to leveraged protocols. Higher risk, higher potential returns.
2. Revenue Yield Requirement
requireRevenueYield
Requires that yield generation comes from genuine protocol revenue, not token emissions.
Rationale: Protocols relying on inflationary token emissions for yield are often unsustainable. Revenue from fees, lending interest, or other real economic activity indicates a healthier, more durable protocol.
Only protocols with verifiable revenue-based yield. Excludes emission-dependent protocols.
Yield from any source acceptable, including token emissions.
3. Gharar Risk Limit
ghararRiskLimit (0-100)
Gharar is an Islamic finance concept referring to excessive uncertainty, ambiguity, or risk in financial transactions. The TEPS framework quantifies this as a score from 0-100, where lower values indicate lower uncertainty.
Factors increasing Gharar score: complex derivatives, opaque pricing, insufficient collateral, counterparty risk, illiquid markets, and unclear terms.
Low Gharar
Simple, transparent protocols
Medium Gharar
Moderate complexity
High Gharar
Complex derivatives
4. Asset Backing Requirement
requireAssetBacking
Requires that protocol tokens and positions are backed by real, verifiable assets.
Rationale: Protocols with proper asset backing provide better protection against insolvency and rug pulls. This rule favors fully collateralized lending protocols, over-collateralized stablecoins, and protocols with transparent treasury management.
Only protocols with verified asset backing. Excludes algorithmic unbacked tokens.
Asset backing not required. Accepts synthetic and algorithmic protocols.
How TEPS is Enforced
TEPS rules are enforced through a combination of on-chain smart contracts and off-chain AI-powered oracles:
- Minting: When you mint a Mandate NFT, your chosen TEPS parameters are permanently encoded on-chain.
- Registration: Protocols are registered in the ProtocolRegistry with their compliance metadata.
- Analysis: When you request to deposit into a protocol, Chainlink Functions calls Claude AI to analyze the protocol's documentation.
- Verdict: The PolicyOracle returns a compliance verdict (COMPLIANT or NON-COMPLIANT) based on your Mandate's TEPS rules.
- Enforcement: The MandatedVault only allows deposits to COMPLIANT protocols. Non-compliant requests are rejected.
- Grace Period: If a protocol becomes non-compliant after deployment, you have a grace period to withdraw before forced exit.
Sample Mandate Profiles
Different investors may choose different TEPS configurations based on their values and risk tolerance:
Conservative Mandate
- Leverage: Not allowed
- Revenue: Required
- Gharar: ≤ 25
- Backing: Required
Balanced Mandate
- Leverage: Limited allowed
- Revenue: Required
- Gharar: ≤ 50
- Backing: Required
Growth Mandate
- Leverage: Allowed
- Revenue: Not required
- Gharar: ≤ 75
- Backing: Not required
Degen Mandate
- Leverage: Allowed
- Revenue: Not required
- Gharar: Any
- Backing: Not required
Create Your Mandate
Mint a Mandate NFT with your preferred TEPS configuration and start enforcing ethical standards on your capital allocation.
Mint Mandate