# Core Safety Factors

The Safety Score Framework evaluates DeFi strategies using four key dimensions. Each factor is designed to capture a specific aspect of safety, from the security of the platform’s underlying technology to the liquidity and market dynamics that affect your funds. Our framework, built on the extensive experience of the Maneki Garden team in DeFi investing and now available to everyone on the Yield Marketplace and for the Maneki AI agent provides a transparent and comprehensive way to assess risk.

## Platform Integrity

Platform Integrity is a crucial component of our Safety Score Framework, designed to evaluate the underlying security and reliability of a DeFi protocol’s technology and governance. It focuses on 3 main sub-factors:

1. Security Audits
2. Incident History
3. Protocol Maturity

A high Platform Integrity score implies that users can trust the technology and governance of the platform to protect their assets. It minimizes the risk of exploitative attacks and unforeseen administrative changes.

### 1. Security Audits

This sub-factor assesses whether the protocol’s smart contracts have been audited by reputable firms, examines any critical findings, and checks for an active bug bounty program.

Scoring Table:

<table data-header-hidden><thead><tr><th width="434.00390625"></th><th></th></tr></thead><tbody><tr><td>Explanation</td><td>Score (0–10)</td></tr><tr><td>3+ independent audits by top firms, no critical issues, active bug bounty</td><td>10</td></tr><tr><td>2–3 audits by reputable firms, no critical issues, active bug bounty</td><td>9</td></tr><tr><td>2+ audits with minor/medium issues quickly resolved, bug bounty in place</td><td>8</td></tr><tr><td>1–2 reputable audits with minor issues addressed, basic bug bounty</td><td>7</td></tr><tr><td>1 reputable audit with some medium issues, limited bug bounty</td><td>6</td></tr><tr><td>1 audit by a less-known firm with multiple unresolved medium issues</td><td>5</td></tr><tr><td>Limited audit (unknown auditor), unresolved medium issues, no bug bounty</td><td>4</td></tr><tr><td>No reputable audit, significant vulnerabilities found, unresolved</td><td>3</td></tr><tr><td>Minimal/no audits with critical vulnerabilities known, unresolved</td><td>2</td></tr><tr><td>No audit and severe vulnerabilities identified</td><td>1</td></tr></tbody></table>

### 2. Incident History

This sub-factor measures the protocol’s track record by reviewing past security incidents, exploits, or hacks, and how effectively any issues were resolved. A long, incident-free history reflects high reliability.

Scoring Table:

<table data-header-hidden><thead><tr><th width="414.90234375"></th><th></th></tr></thead><tbody><tr><td>Explanation</td><td>Score (0–10)</td></tr><tr><td>3+ years operating with zero security incidents</td><td>10</td></tr><tr><td>1–3 years operating with no major incidents</td><td>9</td></tr><tr><td>Minor incident(s) swiftly resolved (no funds lost, minimal disruption)</td><td>8</td></tr><tr><td>Minor incident(s) with quick mitigation (small temporary disruption, no user losses)</td><td>7</td></tr><tr><td>Single moderate incident resolved quickly (limited user impact)</td><td>6</td></tr><tr><td>Single moderate incident with slow resolution (temporary inconvenience)</td><td>5</td></tr><tr><td>Multiple minor incidents with limited impact and quick responses</td><td>4</td></tr><tr><td>Major incident resolved but causing losses or significant disruption</td><td>3</td></tr><tr><td>Multiple major incidents with slow responses and significant losses</td><td>2</td></tr><tr><td>Recent critical incident unresolved or poorly addressed</td><td>1</td></tr></tbody></table>

### 3. Protocol Maturity

This sub-factor evaluates the operational history and reliability of the protocol. It considers how long the protocol has been live and its performance across different market conditions.

Scoring Table:

<table data-header-hidden><thead><tr><th width="241.08984375"></th><th width="124.984375"></th><th></th></tr></thead><tbody><tr><td>Protocol Age/Maturity</td><td>Score (0–10)</td><td>Explanation</td></tr><tr><td>5+ years</td><td>10</td><td>Extremely mature; proven over many market cycles.</td></tr><tr><td>3 to 5 years</td><td>9</td><td>Very mature; stable and reliable across cycles.</td></tr><tr><td>2 to 3 years</td><td>8</td><td>Mature; tested under different market conditions.</td></tr><tr><td>1.5 to 2 years</td><td>7</td><td>Good maturity; some track record, but still limited.</td></tr><tr><td>1 to 1.5 years</td><td>6</td><td>Fair maturity; promising but relatively new.</td></tr><tr><td>6 months to 1 year</td><td>5</td><td>Early stage; limited real-world exposure.</td></tr><tr><td>3 to 6 months</td><td>4</td><td>Very new; minimal market testing so far.</td></tr><tr><td>1 to 3 months</td><td>3</td><td>Extremely new; high uncertainty.</td></tr><tr><td>Less than 1 month</td><td>2</td><td>Experimental; almost no live testing.</td></tr><tr><td>Just launched (days/weeks)</td><td>1</td><td>No proven history; very high uncertainty.</td></tr></tbody></table>

### Overall Platform Integrity Calculation

To calculate the overall Platform Integrity Score, we combine the scores of the four sub-factors using their respective weights. The default weights are:

• Security Audits: 40%

• Incident History: 35%

• Protocol Maturity: 25%

{% hint style="info" %}
Formula: Platform Integrity Score = (Security Audits Score \* 0.40) + (Incident History Score \* 0.35) + (Protocol Maturity Score \* 0.25)
{% endhint %}

**Example Calculation**

Assume a protocol receives the following scores:

• Security Audits: 8.0/10

• Incident History: 7.0/10

• Protocol Maturity: 9.0/10

**Calculation:**

• Security Audits Contribution: 8.0 \* 0.40 = 3.2

• Incident History Contribution: 7.0 \* 0.35 = 2.4

• Protocol Maturity Contribution: 9.0 \* 0.25 = 2.2

**Overall Platform Integrity Score:**

{% hint style="info" %}
3.2 + 2.4 + 2.2 = 7.8  (out of 10)
{% endhint %}

## Liquidity

Liquidity is a critical aspect of DeFi safety, measuring how easily you can move your funds in and out of a platform. It primarily evaluates two key areas:

1\. Total Value Locked (TVL)

2\. Withdrawal Constraints

A high liquidity score indicates that a platform holds ample capital and allows for fast and efficient withdrawals, reducing the risk of being locked into an investment during market volatility.

### 1. Total Value Locked (TVL)

TVL represents the total amount of capital locked in a platform’s smart contracts. A higher TVL generally reflects greater liquidity, increased user confidence, and the ability to handle large transactions with minimal price slippage.

Scoring Table:

<table data-header-hidden><thead><tr><th></th><th width="150.375"></th><th></th></tr></thead><tbody><tr><td>TVL Range</td><td>Score (0–10)</td><td>Explanation</td></tr><tr><td>$1B or more</td><td>10</td><td>Extremely high funds available; very liquid.</td></tr><tr><td>$500M to &#x3C;$1B</td><td>9</td><td>Abundant funds; large trades are easy.</td></tr><tr><td>$250M to &#x3C;$500M</td><td>8</td><td>Very strong liquidity; plenty of funds.</td></tr><tr><td>$100M to &#x3C;$250M</td><td>7</td><td>High liquidity; trading is efficient.</td></tr><tr><td>$50M to &#x3C;$100M</td><td>6</td><td>Good liquidity; enough funds for normal trades.</td></tr><tr><td>$20M to &#x3C;$50M</td><td>5</td><td>Moderate liquidity; big trades may move prices.</td></tr><tr><td>$10M to &#x3C;$20M</td><td>4</td><td>Below-average liquidity; noticeable slippage risk.</td></tr><tr><td>$5M to &#x3C;$10M</td><td>3</td><td>Low liquidity; large trades can impact prices.</td></tr><tr><td>$1M to &#x3C;$5M</td><td>2</td><td>Very low liquidity; hard to trade without slippage.</td></tr><tr><td>Less than $1M</td><td>1</td><td>Extremely low liquidity; minimal funds available.</td></tr></tbody></table>

### 2. Withdrawal Constraints

This sub-factor assesses how quickly and efficiently you can withdraw your funds. It examines lock-up periods, unbonding times, and any restrictions that might delay access to your capital.

Scoring Table:

<table data-header-hidden><thead><tr><th></th><th width="139.03125"></th><th></th></tr></thead><tbody><tr><td>Withdrawal Condition</td><td>Score (0–10)</td><td>Explanation</td></tr><tr><td>No lock-up; funds available instantly (0 hours)</td><td>10</td><td>Instant access – funds can be withdrawn immediately.</td></tr><tr><td>Withdrawal processed within a few hours (1–3 hours)</td><td>9</td><td>Nearly immediate – very short wait.</td></tr><tr><td>Withdrawal available within 24 hours</td><td>8</td><td>Very short wait – funds available within 24 hours.</td></tr><tr><td>Withdrawal processed within 1–2 days (24–48 hours)</td><td>7</td><td>Quick access with a minor delay.</td></tr><tr><td>Withdrawal processed within 2–3 days (48–72 hours)</td><td>6</td><td>Moderate wait – typically 2–3 days before funds are available.</td></tr><tr><td>Withdrawal processed within 4–5 days</td><td>5</td><td>Noticeable delay – around 4–5 days to withdraw funds.</td></tr><tr><td>Withdrawal processed within 7 days (1 week)</td><td>4</td><td>Longer wait – about 1 week, reducing immediate liquidity.</td></tr><tr><td>Withdrawal processed within 10 days</td><td>3</td><td>Significant delay – roughly 10 days before funds can be accessed.</td></tr><tr><td>Withdrawal processed within 14 days (2 weeks)</td><td>2</td><td>Extended wait – a 2-week period makes exits difficult.</td></tr><tr><td>Lock-up period of 30+ days or uncertain queue</td><td>1</td><td>Extremely limited access – 30+ days or unpredictable delays.</td></tr></tbody></table>

### Overall Liquidity Calculation

To calculate the overall Liquidity Score, we use a weighted sum of the two sub-factors. The default weights reflect the importance of each aspect:

* TVL (Total Value Locked): 70%
* Withdrawal Constraints: 30%

**Formula:**

{% hint style="info" %}
Liquidity Score = (TVL Score \* 0.70) + (Withdrawal Constraints Score \* 0.30)
{% endhint %}

**Example Calculation**

Suppose a protocol has the following scores:

* TVL Score: 9.0/10
* Withdrawal Constraints Score: 8.0/10

**Calculation:**

* TVL Contribution: 9.0 \* 0.70 = 6.3
* Withdrawal Constraints Contribution: 8.0 \* 0.30 = 2.4

**Overall Liquidity Score:**

{% hint style="info" %}
6.3 + 2.4 = 8.7  (out of 10)
{% endhint %}

## Market Stability

Market Stability measures how susceptible a DeFi strategy is to fluctuations in the crypto market. It examines factors ranging from the inherent volatility of the underlying assets to broader macroeconomic influences. This section is divided into four sub-factors:

1\. Volatility of Underlying Assets

2\. Market Movements (Impermanent Loss)

3\. Interest-Rate / Yield Stability

4\. Macro Conditions (Peg Stability & Economic Exposure)

A higher Market Stability score indicates that the strategy is less exposed to sudden market swings and adverse economic conditions, thereby reducing potential losses.

### 1. Volatility of Underlying Assets

This sub-factor assesses the inherent price stability of the assets used in the strategy. Stablecoins (e.g., USDC, USDT) tend to score higher, while tokens known for high volatility or experimental altcoins score lower.

Scoring Table:

<table data-header-hidden><thead><tr><th></th><th width="132.19921875"></th><th></th></tr></thead><tbody><tr><td>Asset Type</td><td>Score (0–10)</td><td>Explanation</td></tr><tr><td>Fully fiat-backed stablecoins (e.g., USDC, USDT)</td><td>10</td><td>Extremely stable with negligible price fluctuations.</td></tr><tr><td>Overcollateralized stablecoins (backed by volatile assets)</td><td>8–9</td><td>Generally stable but with minor risks.</td></tr><tr><td>Blue-chip cryptocurrencies (e.g., ETH, BTC)</td><td>6–7</td><td>Moderately volatile; stability is less predictable.</td></tr><tr><td>Moderately volatile altcoins (e.g., LINK, UNI)</td><td>4–5</td><td>Noticeable fluctuations; higher risk of volatility.</td></tr><tr><td>Highly volatile or experimental tokens</td><td>1–3</td><td>Extremely volatile; high uncertainty and risk.</td></tr></tbody></table>

### 2. Market Movements (Impermanent Loss)

This sub-factor evaluates the risk of sudden price movements that can lead to impermanent loss, particularly in liquidity pools. It examines how asset pairs react to price divergence, which may lead to reduced returns compared to holding the assets.

Scoring Table:

<table data-header-hidden><thead><tr><th></th><th width="142.75"></th><th></th></tr></thead><tbody><tr><td>Asset Pair Category</td><td>Score (0–10)</td><td>Explanation</td></tr><tr><td>Stable pairs (e.g., USDC/USDT)</td><td>10</td><td>No exposure to price movements; minimal risk.</td></tr><tr><td>Overcollateralized stable pairs (e.g., algorithmic stablecoins)</td><td>8–9</td><td>Minimal impermanent loss or hedged positions.</td></tr><tr><td>Blue-chip crypto pairs (e.g., ETH/USDC, BTC/USDC)</td><td>6–7</td><td>Moderate risk; some exposure to impermanent loss.</td></tr><tr><td>Moderately volatile pairs (e.g., LINK/UNI)</td><td>4–5</td><td>Notable exposure; higher risk of loss due to volatility.</td></tr><tr><td>Highly volatile pairs (small-cap or experimental tokens)</td><td>1–3</td><td>High impermanent loss risk; significant exposure to fluctuations.</td></tr></tbody></table>

### 3. Interest-Rate / Yield Stability

This sub-factor measures the consistency and predictability of returns generated by the strategy. It accounts for whether yields are fixed or variable and quantifies the fluctuations using statistical measures such as the standard deviation (SD) of historical APY values.

Scoring Table:

<table data-header-hidden><thead><tr><th></th><th width="150.78125"></th><th></th></tr></thead><tbody><tr><td>Standard Deviation (SD) Range (in % points)</td><td>Yield Stability Score (0–10)</td><td>Interpretation</td></tr><tr><td>Less than 1.0%</td><td>10</td><td>Extremely stable yield.</td></tr><tr><td>1.0% to &#x3C;2.0%</td><td>9</td><td>Very stable yield.</td></tr><tr><td>2.0% to &#x3C;3.0%</td><td>8</td><td>Stable yield with minor fluctuations.</td></tr><tr><td>3.0% to &#x3C;4.0%</td><td>7</td><td>Moderately stable yield.</td></tr><tr><td>4.0% to &#x3C;5.0%</td><td>6</td><td>Noticeable fluctuations; moderate stability.</td></tr><tr><td>5.0% to &#x3C;6.0%</td><td>5</td><td>Moderately volatile yield.</td></tr><tr><td>6.0% to &#x3C;7.0%</td><td>4</td><td>Some volatility present.</td></tr><tr><td>7.0% to &#x3C;8.0%</td><td>3</td><td>High volatility; low yield stability.</td></tr><tr><td>8.0% to &#x3C;9.0%</td><td>2</td><td>Very high volatility.</td></tr><tr><td>9.0% or above</td><td>1</td><td>Extremely volatile yield; very unstable.</td></tr></tbody></table>

{% hint style="info" %}
To determine the SD, calculate the standard deviation of the daily APY values over a designated period (e.g., 30 days). A lower SD reflects more stable yields.
{% endhint %}

### 4. Macro Conditions (Peg Stability & Economic Exposure)

This sub-factor considers broader market factors that influence the stability of the assets. It evaluates whether stablecoins maintain their peg, the degree of economic exposure to market shocks, and the overall reliability of the asset’s value.

Scoring Table:

<table data-header-hidden><thead><tr><th width="424.57421875"></th><th></th></tr></thead><tbody><tr><td>Explanation</td><td>Score (0–10)</td></tr><tr><td>Asset stays almost perfectly pegged; negligible deviation and minimal economic exposure.</td><td>10</td></tr><tr><td>Asset remains very stable with only trivial fluctuations.</td><td>9</td></tr><tr><td>Largely stable with minor deviations; very low economic exposure.</td><td>8</td></tr><tr><td>Generally holds its peg with occasional moderate deviations; moderate exposure.</td><td>7</td></tr><tr><td>Noticeable fluctuations; peg is less reliable; moderate economic exposure.</td><td>6</td></tr><tr><td>Moderate volatility and deviations; visible risk of depeg.</td><td>5</td></tr><tr><td>Frequent deviations; significant economic exposure.</td><td>4</td></tr><tr><td>Highly volatile with frequent peg deviations; high exposure.</td><td>3</td></tr><tr><td>Extreme fluctuations; severe peg deviations and very high economic risk.</td><td>2</td></tr><tr><td>Extremely Unstable</td><td>1</td></tr></tbody></table>

### Overall Market Stability Calculation

To compute the overall Market Stability Score, we aggregate the scores of the four sub-factors using their respective weights. A suggested default weighting is as follows:

• Volatility of Underlying Assets: 35%

• Market Movements (Impermanent Loss): 25%

• Interest-Rate / Yield Stability: 25%

• Macro Conditions (Peg Stability & Economic Exposure): 15%

**Formula:**

{% hint style="info" %}
Market Stability Score = (Volatility Score \* 0.35) + (Market Movements Score \* 0.25) + (Yield Stability Score \* 0.25) + (Macro Conditions Score \* 0.15)
{% endhint %}

**Example Calculation**

Suppose a protocol has the following sub-factor scores:

• Volatility of Underlying Assets: 8.0/10

• Market Movements (Impermanent Loss): 7.0/10

• Interest-Rate / Yield Stability: 6.0/10

• Macro Conditions: 9.0/10

**Calculation:**

• Volatility Contribution: 8.0 \* 0.35 = 2.8

• Market Movements Contribution: 7.0 \* 0.25 = 1.75

• Yield Stability Contribution: 6.0 \* 0.25 = 1.5

• Macro Conditions Contribution: 9.0 \* 0.15 = 1.35

**Overall Market Stability Score:**

{% hint style="info" %}
2.8 + 1.75 + 1.5 + 1.35 = 7.4  (out of 10)
{% endhint %}

## External Dependencies

External Dependencies evaluates the risk a DeFi strategy faces due to its reliance on third-party services. This factor examines three key areas:

1\. Oracle Reliability

2\. Composability

3\. Bridging Risk

A high External Dependencies score means that the strategy is minimally dependent on external services, reducing the potential for cascading failures if one service encounters an issue.

### 1. Oracle Reliability

Assesses the trustworthiness of the external price feeds that the strategy depends on. Reliable oracles help ensure accurate pricing data and reduce the risk of manipulation or delays.

Scoring Table:

<table data-header-hidden><thead><tr><th width="420.8828125"></th><th></th></tr></thead><tbody><tr><td>Description</td><td>Score (0–10)</td></tr><tr><td>Multiple top-tier, decentralized oracles (e.g., Chainlink + Band) with full redundancy</td><td>10</td></tr><tr><td>Uses highly reputable decentralized oracle(s) with strong backup mechanisms</td><td>9</td></tr><tr><td>Employs a well-known decentralized oracle; very trustworthy with slight redundancy limits</td><td>8</td></tr><tr><td>Uses a good oracle that meets basic standards but may rely on fewer sources</td><td>7</td></tr><tr><td>Generally acceptable oracle, though it leans on a single source or shows minor delays/issues</td><td>6</td></tr><tr><td>Standard oracle with some centralization; occasional data delays or inconsistencies</td><td>5</td></tr><tr><td>Relies on a single, less-tested source; higher risk of inaccurate or delayed data</td><td>4</td></tr><tr><td>Noticeable centralization and occasional inaccuracies impacting data quality</td><td>3</td></tr><tr><td>Uses an oracle with frequent issues and poor decentralization; data quality is questionable</td><td>2</td></tr><tr><td>Lacks proper oracle integration or relies on highly centralized, untrusted sources</td><td>1</td></tr></tbody></table>

### 2. Composability

Measures the strategy’s dependency on other DeFi protocols. A strategy that is highly self-contained carries less risk because it doesn’t rely heavily on external platforms, which may themselves have vulnerabilities.

Scoring Table:

<table data-header-hidden><thead><tr><th width="425.8671875"></th><th></th></tr></thead><tbody><tr><td>Description</td><td>Score (0–10)</td></tr><tr><td>Fully self-contained; no external protocols used</td><td>10</td></tr><tr><td>Barely composable; relies on one extremely well-established external protocol with a proven track record</td><td>9</td></tr><tr><td>Minimal dependencies; integrates with one reputable external protocol</td><td>8</td></tr><tr><td>Low dependencies; uses 2 well-tested external protocols</td><td>7</td></tr><tr><td>Moderate dependencies; depends on 2–3 established protocols (diversification helps)</td><td>6</td></tr><tr><td>Noticeable dependencies; relies on 3 external protocols where one failure could impact the whole strategy</td><td>5</td></tr><tr><td>Significant dependencies; uses 4 or more protocols, increasing complexity and cascading risk</td><td>4</td></tr><tr><td>High dependency; heavy reliance on several external protocols, some of which are less proven</td><td>3</td></tr><tr><td>Very high dependency; extremely complex integration with many protocols; systemic risk is very high</td><td>2</td></tr><tr><td>Extremely dependent; nearly all functionality depends on untested or experimental protocols</td><td>1</td></tr></tbody></table>

### 3. Bridging Risk

Evaluates the reliance on cross-chain bridges for asset transfers. Bridges can be vulnerable to security breaches, so minimal reliance or use of highly reputable bridging solutions reduces risk.

Scoring Table:

<table data-header-hidden><thead><tr><th width="432.3046875"></th><th></th></tr></thead><tbody><tr><td>Description</td><td>Score (0–10)</td></tr><tr><td>No bridging involved; operates on a single blockchain</td><td>10</td></tr><tr><td>Extremely low bridging dependency; if used, it’s highly reputable and used very minimally</td><td>9</td></tr><tr><td>Very low bridging dependency; uses a trusted bridge with strong security measures sparingly</td><td>8</td></tr><tr><td>Low bridging dependency; only occasional cross-chain transfers via a well-established bridge</td><td>7</td></tr><tr><td>Moderate bridging dependency; moderate use of bridging via a reputable service</td><td>6</td></tr><tr><td>Noticeable bridging dependency; relies on a single bridge or bridges with moderate security</td><td>5</td></tr><tr><td>Significant bridging dependency; heavily depends on cross-chain transfers via a bridge with some centralization or limited audits</td><td>4</td></tr><tr><td>High bridging dependency; relies on a bridge with known issues or less rigorous security</td><td>3</td></tr><tr><td>Very high bridging dependency; largely depends on an unproven or frequently problematic bridge</td><td>2</td></tr><tr><td>Extremely unreliable bridging; uses an untested, highly centralized, or compromised bridge</td><td>1</td></tr></tbody></table>

### Overall External Dependencies Calculation

To calculate the overall External Dependencies Score, we aggregate the sub-factor scores using the following default weights:

• Oracle Reliability: 30%

• Composability: 40%

• Bridging Risk: 30%

**Formula:**

{% hint style="info" %}
External Dependencies Score = (Oracle Score \* 0.30) + (Composability Score \* 0.40) + (Bridging Risk Score \* 0.30)
{% endhint %}

**Example Calculation**

Assume a protocol receives the following scores:

• Oracle Reliability: 8.0/10

• Composability: 9.0/10

• Bridging Risk: 10/10 (no bridging used)

**Calculation:**

• Oracle Contribution: 8.0 \* 0.30 = 2.4

• Composability Contribution: 9.0 \* 0.40 = 3.6

• Bridging Risk Contribution: 10 \* 0.30 = 3.0

**Overall External Dependencies Score:**

{% hint style="info" %}
2.4 + 3.6 + 3.0 = 9.0  (out of 10)<br>
{% endhint %}

## Overall Safety Score Calculation

The Overall Safety Score aggregates the risk assessments from four core factors—Platform Integrity, Liquidity, Market Stability, and External Dependencies—into a single, comprehensive score. This score provides a clear snapshot of a DeFi strategy’s safety, enabling users to quickly compare platforms and make informed investment decisions.

### 1. Weighting of Factors

The default weights assigned to each factor—reflecting our extensive experience in DeFi investing—are as follows:

• Platform Integrity: 30%

• Liquidity: 25%

• Market Stability: 25%

• External Dependencies: 20%

Note: These weights can be adjusted to better fit specific types of DeFi strategies. For example, lending protocols might assign a higher weight to Liquidity, while liquidity pools might emphasize Market Stability more.

### 2. Calculation Formula

The Overall Safety Score is calculated using the weighted sum of the individual factor scores:

{% hint style="info" %}
Overall Safety Score = (Platform Integrity \* 0.30) + (Liquidity \* 0.25) + (Market Stability \* 0.25) + (External Dependencies \* 0.20)
{% endhint %}

Each factor is scored on a 0–10 scale. If desired, the final score can be multiplied by 10 to convert it to a 0–100 scale for easier interpretation.

### 3. Example Calculation

Consider a sample protocol with the following scores:

• Platform Integrity: 7.5/10

• Liquidity: 9.0/10

• Market Stability: 5.0/10

• External Dependencies: 8.0/10

**Calculate the weighted contributions:**

• Platform Integrity: 7.5 \* 0.30 = 2.25

• Liquidity: 9.0 \* 0.25 = 2.25

• Market Stability: 5.0 \* 0.25 = 1.25

• External Dependencies: 8.0 \* 0.20 = 1.60

**Overall Score (0–10 scale):**

2.25 + 2.25 + 1.25 + 1.60 = 7.35

**Overall Score (0–100 scale):**

7.35 \* 10 = 73.5, (rounded to 74/100)

Thus, the protocol would be displayed as:

**Overall Safety Score: 74 / 100 (Moderately Safe)**

### 4. Mapping to Tiers or Grades

To simplify interpretation, the numeric score can be mapped to qualitative tiers:

| Score Range | Grade/Label        | Color Indicator |
| ----------- | ------------------ | --------------- |
| 81 – 100    | High Safety        | Green           |
| 61 – 80     | Moderate Safety    | Yellow          |
| 41 – 60     | Low Safety         | Orange          |
| 0 – 40      | Caution / Very Low | Red             |

#### **Tier Breakdown**

81 – 100: High Safety (Green)

Strategies in this score range are evaluated as very safe. They have robust security measures in place, strong operational history, and limited reliance on risky external components. This tier indicates that the platform’s code is thoroughly audited, its liquidity is high, and the market stability is excellent.

If you are risk-averse or prefer conservative investments, these strategies are highly recommended. They offer a solid, stable choice and are less likely to suffer from significant losses or operational issues.

Consider allocating a larger portion of your portfolio to High Safety strategies to minimize risk.

***

61 – 80: Moderate Safety (Yellow)

Strategies with scores in this range are assessed as moderately safe. They have good security and operational performance but might carry some vulnerabilities such as occasional liquidity constraints or minor market fluctuations. They may also depend on a few external services that add some risk.

These strategies are suitable if you’re willing to accept a bit more risk for potentially higher returns. They represent a balanced option where the safety is acceptable, but you should still be aware of some trade-offs.

Diversify your investments by mixing Moderate Safety strategies with High Safety options. This blend can help you balance risk and reward effectively.

***

41 – 60: Low Safety (Orange)

Strategies in this tier are considered to have a lower safety profile. They may exhibit volatile underlying assets, limitations in liquidity, or significant external dependencies. These factors increase the risk of encountering market swings or operational disruptions.

Low Safety strategies are riskier and might not be ideal for those new to DeFi or for conservative portfolios. They might offer higher returns as a risk premium, but they also come with a higher chance of losses.

Approach these strategies with caution. If you choose to invest, consider only a small portion of your portfolio and ensure you have a solid understanding of the potential risks involved.

***

0 – 40: Caution / Very Low (Red)

Strategies scoring in this range have significant issues in one or more key areas—such as security vulnerabilities, poor liquidity, high asset volatility, or excessive reliance on unstable external services. These factors combine to create a very high-risk investment environment.

These strategies are generally not recommended, especially for crypto newbies or risk-averse investors. They have a higher probability of experiencing serious disruptions, hacks, or liquidity crises.

It is best to avoid investing in strategies that fall in this tier unless you have a very high risk tolerance and a deep understanding of the underlying issues.

***

#### **How to Use These Tiers in Your Investment Decisions**

**Quick Assessment:**

Use the color-coded tiers as a rapid way to gauge the overall safety of a strategy. Green indicates strong safety, yellow is moderate, orange is low, and red should prompt significant caution.

**Portfolio Diversification:**

Balancing your portfolio with a mix of strategies from different tiers can help manage overall risk. For example, a healthy portfolio might skew toward High and Moderate Safety strategies while keeping a limited exposure to Low Safety options.

**In-Depth Research:**

The tier system is a starting point. Once you identify a strategy in a desired tier, dive deeper into the specific criteria (such as audit results, incident history, and liquidity metrics) to understand the details behind the score.

**Regular Updates:**

Remember that our scores are dynamic. Regular updates ensure that the tier you see reflects the current state of the strategy, helping you make decisions based on up-to-date information.

Using this structured tier system, even crypto newcomers can quickly understand and evaluate the risk profile of a DeFi strategy, allowing for more confident and informed investment decisions.

### 5. Guide to Using the Safety Score Framework in Investment Decisions

Our Safety Score Framework is designed with a new scoring logic that often results in high overall safety ratings, even if some individual factors show more risk. This guide will help you understand each factor and how to use that information to make informed investment decisions.

***

#### **Understanding the Four Key Factors**

1\. Platform Integrity

* **What It Measures:** Platform Integrity looks at the technical and governance aspects of a strategy. It includes factors such as security audits, incident history, admin control mechanisms, and protocol maturity.
* **How to Use It:**
  * High Score: Implies that the platform has been extensively audited, has a solid track record, and employs decentralized governance (e.g., multisig control).
  * Investment Insight: Even if some aspects (like a very new protocol) pull the sub-score slightly down, a high overall Platform Integrity score indicates that the strategy’s code and governance systems are robust. This is a strong signal that, from a technical standpoint, your funds are better protected.

2\. Liquidity

* **What It Measures:** Liquidity assesses two primary elements: the total value locked (TVL) in the platform, which reflects the amount of capital available, and the ease of withdrawal (i.e., whether there are long lock-up periods or delays).
* How to Use It:
  * High Score: Indicates that the platform holds a large amount of capital and that you can withdraw funds quickly.
  * Investment Insight: A high Liquidity score gives you the confidence that you won’t be locked in during market volatility. Even if some strategies might use more volatile assets, having strong liquidity means you can exit your investment quickly if needed.

3\. Market Stability

* **What It Measures:** This factor evaluates the inherent stability of the underlying assets (are they stablecoins or volatile tokens?), the risk of impermanent loss, the consistency of yield returns, and the overall macroeconomic conditions (like stablecoin pegging).
* **How to Use It:**
  * High Score: Means the strategy’s value is less prone to sudden market swings.
  * Investment Insight: It’s possible for a strategy to include highly volatile underlying assets yet still maintain a high overall safety score if it has mechanisms to minimize risks (such as stable liquidity pools or hedged positions). This tells you that despite some inherent volatility, other measures in place help stabilize the overall performance.
* **Remember:** If a strategy has a lower score in this factor, it might be more susceptible to market fluctuations. Investors with lower risk tolerance might prefer strategies with higher Market Stability scores.

4\. External Dependencies

* **What It Measures:** External Dependencies look at the extent to which the strategy relies on third-party services (like oracles, integrations with other protocols, and bridging technologies). Reducing dependency on these external components can lower the risk of a cascading failure.
* **How to Use It:**
  * High Score: Indicates that the strategy is largely self-contained and uses reliable external services with redundancy.
  * Investment Insight: A high External Dependencies score means that even if some external elements (like oracles) are used, they are secure and backed by reputable providers. For a newbie, a high score here suggests that the strategy is designed to minimize risks from outside factors, increasing its reliability.

***

#### **Making Investment Decisions Using the Scores**

* **Overall Safety Score:** The overall score is calculated as a weighted sum of the four factors. While each factor provides insight into specific aspects of risk, the overall safety score gives you a quick, summarized view. Even if one sub-factor seems less favorable (like some inherent asset volatility), the combined score tells you if the strategy’s protective mechanisms (such as strong security and liquidity) balance the risk.
* **Risk Tolerance and Portfolio Allocation:**
  * Conservative Investors: May favor strategies in the “High Safety” (Green) tier where all or most factors score high.
  * Moderate Investors: Might allocate some funds to strategies in the “Moderate Safety” (Yellow) tier, where there might be a trade-off between potential returns and slightly higher risk.
  * Risk-Takers: Could explore strategies with a mix, provided they understand which factors are causing lower scores and what contingencies are in place.
* **Context Matters:** Look at each factor in context. For example, a strategy might have volatile underlying assets (a lower Market Stability sub-score) but might be underpinned by exceptional liquidity and strong security measures (high scores in Liquidity and Platform Integrity). Such strategies may still be suitable if you’re comfortable with that specific type of asset volatility and if the overall safety score remains high.
* **Regular Monitoring:** Since our scores are updated regularly, make it a habit to review the latest scores before making or adjusting your investments.

## Disclaimers & Future Updates

### Disclaimer

The Safety Score Framework is provided for informational and educational purposes only. It is not intended to constitute financial advice, a recommendation to invest, or a guarantee of future performance. Users should conduct their own independent research and consult with a financial advisor before making any investment decisions. The framework reflects our analysis based on available data and our extensive experience in DeFi investing, but it cannot account for all potential risks or future market changes.

### Dynamic Nature of Scores

Please note that the scores provided in this framework are dynamic and updated regularly (e.g., on a weekly basis) to reflect current conditions in the DeFi ecosystem. Market conditions, protocol performance, and external factors are constantly evolving, and as such, the Safety Score is subject to revisions. We maintain transparent documentation of our data sources and scoring methodologies, ensuring that any changes in the scores are clearly recorded and justified.

By using this framework, you acknowledge that the Safety Score is an evolving metric designed to provide a snapshot of current risk levels and is not a static or absolute measure of safety.
