Developers > Security > Risk Framework
Risks affecting DeFi protocols can be segregated into systemic risks or risks that impact a large part or all of the DeFi ecosystem such as currency, regulatory and chain risks, and idiosyncratic risks or risks that impact a single protocol or group of protocols, such as smart contract, governance, market, financial and oracle risks.
The framework is constituted of four parts:
The DeFi Safety and Exponential scores consider the vast majority of the Protocol risks related to Idiosyncratic risks:
DeFi Safety metrics
The DeFi Safety score will be time-adjusted, considering when the report was last updated. The older the analysis, the lower the score.
- Smart contracts and team
- Admin controls
where PF stands for Protocol fundamentals and PE for Pool economics.
- (PF) Asset strength
- (PF) Protocol code quality
- (PF) Protocol maturity
- (PF) Protocol design
- (PF) Chain design
- (PE) Collateralization and leverage
- (PE) Impermanent loss
- (PE) Yield outlook
- (PE) Chain reliability
This review mainly focuses on smart contracts and market/financial risks.
The Strategy component refers to specific risks related to each underlying market integrated into Idle strategies. The strategy score will be composed of a fixed parameter associated with the vertical and a score associated with thematic risks.
Current underlying sources
- Best Yield: Aave, Compound and either Senior or Junior tranches.
- Yield Tranches: Euler, Morpho, Lido and Clearpool.
The Coverage component measures the minimum coverage needed to let the Best Yield deposit funds into the Yield Tranches pools.
This metric behaves differently with respect to the others listed and will be computed on a case by case need. It will be summed to the previous scores obtained with the reviews: Third-party, Internal Security and Strategy.
The Risk Framework will assign a percentage score that will be then translated to a letter rating (A-E) based on the protocol risks evaluation, where
- A will be given to the highest-rated protocols in terms of overall risks
- E will be given to the lowest-rated protocols in terms of overall risks