ShredPay DeFi Risk Ratings Methodology

ShredPay Ratings is our proprietary, three-tiered due diligence framework designed to evaluate and score the operational, technical, and financial health of Decentralized Finance (DeFi) protocols and their specific products.

Tier 1: Protocol Due Diligence

The Protocol layer focuses on the foundational security and governance of the core decentralized application itself. This evaluation reviews the robustness of the protocol’s underlying technology and management. The goal of Protocol Due Diligence is to assess the core protocol infrastructure’s technical and compliance effectiveness.

Tier 2: Vault Due Diligence

The Vault/Curator layer shifts focus to the entity or team responsible for managing the specific investment strategy or vault parameters. This assessment is critical for understanding the human and organizational factors that influence risk.This determines the level to which the entity entrusted with strategic oversight possesses the requisite expertise, transparency, and technical knowledge to effectively manage the allocated capital responsibly.

Tier 3: Market Due Diligence

The Market layer provides the final layer of risk assessment, focusing on the real-time financial and on-chain health of the specific underlying asset pools and deployments. This analysis uses available quantitative metrics to determine the market’s financial stability and risk appetite.

ShredPay Ratings Levels

For each DeFi protocol offered on the ShredPay platform, the individual findings from the Protocol, Vault, and Market due diligence layers are synthesized into a final ShredPay Ratings level:

Risk Rating: Low Risk

Partners achieving this score demonstrate strength across all three layers at the time the rating is published.

Risk Rating: Medium-Low Risk

Partners in this tier demonstrate strength in the significant majority of due diligence criteria but may have certain areas that may be marginally less robust at the time the rating is published.

Risk Rating: Medium

Partners in this tier exhibit strong performance in the majority of due diligence criteria but may have certain areas that are somewhat less robust at the time the rating is published.

Risk Rating: Medium-High

Partners in this tier exhibit adequate performance in the majority of due diligence criteria but may have certain areas that could be more robust at the time the rating is published.

Risk Rating: High Risk

While these partners satisfy basic requirements, they present notable, elevated risks across multiple layers at the time the rating is published. These offerings may be riskier than the others listed, and users should exercise a higher degree of discretion and due diligence in their usage.

Important Disclosure: In issuing and maintaining its ShredPay DeFi Ratings, ShredPay relies on factual information it obtains from the third-party decentralized finance protocol and other publicly available sources that ShredPay believes to be credible. ShedPay conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available. A ShredPay DeFi Risk Rating does not constitute an individualized recommendation that a decentralized finance protocol deposit/transaction is appropriate for you. You agree not to hold ShredPay liable for any losses, lost profits or other damages resulting from your use of - or reliance upon - any ShredPay DeFi Rating.