# Risk methodology > How 1delta scores lending protocols, markets, vaults, assets and chains on one 1-5 scale. Source: https://docs.1delta.io/risk/ --- Every lending market, vault, token and chain 1delta serves carries a risk rating. This section documents how those ratings are produced: what is measured, what the thresholds are, and — just as importantly — what is deliberately *not* penalised. The ratings are descriptive, not prescriptive. They exist so that an integrator can filter a universe of thousands of markets down to the ones that meet a stated bar, and so that a number shown next to a position can be explained. --- ## One scale Everything resolves to the same pair of fields: | Field | Values | Meaning | | --- | --- | --- | | `score` | 1-5, integer | Severity. 1 is safest, 5 is worst. | | `level` | `green`, `yellow`, `red` | Band. `green` = score ≤ 2, `yellow` = 3, `red` ≥ 4. | A score is not a probability and the steps are not linear. Read it as a bucket: 1-2 means nothing we screen for is wrong, 3 means something is unproven or uncertain, 4-5 means a concrete defect was found. The API exposes the composed result on lending pairs and pools as `risk` (`maxTokenScore`, `configScore`, and a `breakdown` array), and most listing endpoints accept a `maxRiskScore` filter that defaults to **4**. --- ## The dimensions Risk is scored independently per dimension and only then composed, so a reader can always see which of them produced a downgrade. | Dimension | Unit rated | What it captures | Page | | --- | --- | --- | --- | | **Protocol** | lender (e.g. `AAVE_V3`) | Track record, audits, maturity, pool governance | [Lending protocols](https://docs.1delta.io/risk/lending-protocols/) | | **Governance** | pool, market, token, vault | Who can unilaterally change or upgrade the thing holding the money | [Governance](https://docs.1delta.io/risk/governance/) | | **Oracle** | priced market / feed | Whether the price a market liquidates on is sound | [Oracles](https://docs.1delta.io/risk/oracles/) | | **Curation** | curator, curated market | Who selects and parameterises isolated markets | [Curation](https://docs.1delta.io/risk/curators/) | | **Bad debt** | market, reserve, vault | Losses that already happened, normalised by size | [Bad debt](https://docs.1delta.io/risk/bad-debt/) | | **Vault** | ERC-4626 style vault | Composite of curator, holdings, withdrawability, NAV integrity | [Vaults](https://docs.1delta.io/risk/vaults/) | | **Asset** | token, per chain | Peg behaviour, issuer/upgrade control, wrapper inheritance, liquidity | [Assets and LSTs](https://docs.1delta.io/risk/assets/) | | **Chain** | chain id | Rollup decentralisation and exit guarantees | [Chains](https://docs.1delta.io/risk/chains/) | --- ## Composition rules Four rules decide how sub-scores combine. They are applied consistently across every pipeline. **1. Independent failure modes take the worst, not the average.** Governance, oracle integrity and bad debt are separate ways to lose the same deposit. Averaging lets a sound timelock cancel out a broken price feed, so the level is the worst applicable dimension. Weighted means are used only *inside* a dimension — for example across a vault's holdings, where the weights are real economic exposure. **2. Observed failure dominates predicted safety.** A market with two top-tier curators and live bad debt is rated on the bad debt. Audits, curator AUM and protocol age are proxies for expected safety; realised losses and confirmed misconfigurations are evidence. **3. Unknown is not safe, and not automatically dangerous either.** A contract the classifier could not resolve, a token nobody has listed, a market with no curator — these cap at `yellow`. They never silently pass as green, and they never alone force red. A gap in our coverage is not evidence against the protocol. **4. Materiality gates before ratios.** Every normalised metric divides by a size, and near-zero denominators manufacture infinite risk. Abandoned dust — a $9 remnant in an empty market, a test vault holding a dollar — is recorded as informational instead of rated catastrophic. ### What is deliberately not penalised - **Volatility and RWA-ness.** Lending against a volatile or real-world asset is ordinary lending risk, priced by LLTV. Only *untrusted* collateral (compromised, discontinued, or a proven broken peg) counts against a market. - **Illiquidity by design.** Vaults with async redemption (LST unbonding, cooldown savings, epoch-based withdrawal) are not marked down for a withdrawal delay that is the product working as specified. - **Permissionless deployment.** On isolated-market protocols anyone can deploy a market nobody uses. A single junk market does not paint the whole protocol red; the lender is rated on the *share* of its classified markets that are high-risk. --- ## Where the data comes from | Source | Provides | | --- | --- | | DefiLlama | Hack history with dated amounts, protocol TVL history, stablecoin supply and price history, audit links | | Exponential.fi | Baseline protocol rating, auditor list, risk commentary | | L2Beat | Rollup risk criteria (state validation, DA, exit window, sequencer/proposer failure) | | Morpho Blue API | Curators, per-market curator index, market warnings, bad debt (realised and unrealised), vault allocations | | Euler V3 Data API and entity registry | Vault governors, curators, Euler Earn allocations, `lostAssets` | | On-chain reads (multi-RPC) | Pool and market admins, proxy patterns and upgrade authorities, mint authority, Aave `getReserveDeficit`, Gearbox credit-account solvency, Safe thresholds and owners | | 1delta data layer | Market universe, collateral sets, token lists, prices | | Nordstern and Pendle | DEX liquidity depth — Nordstern DEX-aggregator depth for every asset, and the Pendle markets API for Pendle PT/YT/SY tokens | | CoinGecko | Asset-platform maps, market caps and prices, stablecoin metadata, the yield-bearing-stablecoin category, and cover pricing for the Nexus Mutual view | | Nexus Mutual | Cover amounts and premium rates per protocol — a market-priced view of protocol risk, tracked alongside the scores but not folded into them | | Frankfurter | Fiat reference rates for non-USD stablecoin pegs | Curated inputs (asset whitelist, renowned-curator allowlist, rating overrides for protocols winding down, governance overrides for non-standard proxies) fill the gaps that no automated source covers. They only ever refine a specific entry, and each carries a stated reason. --- ## Refresh and staleness Hack data refreshes several times a day; the protocol, asset, chain, oracle, governance and vault pipelines run as one ordered sweep, each stage reading the previous stage's output. Two habits keep a stale input from reading as a clean bill of health: - A snapshot older than the freshness window can only ever *raise* a vault's floor — never lower an existing red. - A fetch that returns nothing fails loudly rather than overwriting good data with an empty file. An empty hack list would otherwise read as "no protocol was ever exploited". --- ## Limitations - Scores are point-in-time. A protocol that has never been exploited is not a protocol that cannot be. - Coverage is uneven. Some markets are unscreened for oracle or governance risk; those come back `unknown` and cap at yellow rather than being assumed safe. - Share-of-markets is used where share-of-deposits would be the better denominator, because per-market TVL is not available for every family. - Curator quality is measured by assets under management and identity verification, which are proxies for competence, not measures of it.