DeFi Pulse unveils safety ratings to allow users to compare risk

Decentralized finance analytics platform DeFi Pulse has launched new safety ratings in alpha to enable users to compare the risks of on-chain protocols.

The ratings system is still in development and does not factor in all risks, such as smart contract risks.

In partnership with digital asset modeling platform Gauntlet, the grading tool looks at key factors including user behaviour, collateral volatility, relative collateral liquidity, protocol parameters, and smart contract risk.

Each project is then given a risk profile ranking them between 1-100.DeFi Pulse and Gauntlet's new project ranking scores.

Decentralized lending protocols Aave and Compound are the first projects to be reviewed in the new Economic Safety Grade scheme, receiving scores of 95% and 91% respectively.

"The risk of the system for users borrowing stablecoins against this collateral is estimated and normalized to create the 1 to 100 grade you see on DeFi Pulse."

The assessment tool does not aim to model smart contract risks, Gauntlet noted, asserting that "Auditors and formal verification tools are best suited for assessing this form of risk."

The growing popularity of DeFi has seen a corresponding increase in risk.

Last week, liquidity mining pool DeFi project Yfdexf.

The new safety ratings tool won't necessarily address all of these issues, but it's a welcome start.