# Score Breakdown

Each risk dimension is scored 0–10 based on multiple weighted components. Higher scores indicate greater risk.

Dimensions that lack sufficient data are marked **N/A** (`null`) rather than scored as zero. Their weight is redistributed proportionally across the remaining dimensions so the final weights always sum to 1.0.

***

#### 3.1 Smart Contract Risk (25%)

Smart contract risk carries the highest weight because vulnerabilities represent the most direct and catastrophic threat to deposited funds.

**Factors evaluated:**

* Number and recency of completed security audits
* Auditor reputation tier (Tier 1 elite, Tier 2 reputable, Tier 3 other)
* Critical/High findings — whether resolved or outstanding
* Active bug bounty program and payout cap relative to TVL
* Code complexity and upgrade mechanism

***

#### 3.2 Counterparty Risk (20%)

Evaluates human and organizational risk factors — who controls the protocol and how.

**Factors evaluated:**

* Team identity disclosure (fully doxxed, partially doxxed, anonymous)
* Multi-sig configuration and timelock requirements
* Governance participation rate
* Response history to past security incidents
* Quality and frequency of public communications

***

#### 3.3 Credit Risk (15%)

Measures the health and reliability of the capital base supporting the protocol.

**Factors evaluated:**

* Absolute TVL level
* 90-day TVL trend (stable, declining, severely declining)
* TVL drawdown events over 12 months
* Whale concentration (top depositors as % of TVL)

***

#### 3.4 Liquidity Risk (15%)

Assesses how easily positions can be entered and exited without significant slippage.

**Factors evaluated:**

* Available liquidity depth relative to TVL
* Historical liquidity consistency
* Withdrawal queue / lockup mechanisms
* Cross-pool liquidity dependencies

***

#### 3.5 Oracle Risk (15%)

Evaluates the reliability and manipulation resistance of price feeds the protocol depends on.

**Factors evaluated:**

* Oracle provider (Chainlink, TWAP, custom)
* Fallback mechanisms and circuit breakers
* Historical oracle failure incidents
* Update frequency and freshness guarantees

***

#### 3.6 Liquidity Trap Risk (10%)

Backward-looking operational risk measuring the likelihood that deposited funds become difficult to withdraw.

**Factors evaluated:**

* Protocol age and operational history
* Exploit history and compensation track record
* Near-miss / disclosed vulnerability history
* Token unlock schedules and emission pressure

{% hint style="info" %}
**N/A Handling:** Liquidity Trap Risk is the most commonly N/A dimension, particularly for newer protocols with limited operational history. When N/A, its 10% weight is redistributed across the other five dimensions.
{% endhint %}


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