#DeFiGetsGraded

Sky Protocol receives a B-

Ultimately, the assignment of a B- is the result of an analysis that weighs significant weaknesses against certain operational strengths. In this way, among the main risks highlighted by S&P Global in its rating for the DeFi platform are:

Concentration of depositors: the protocol is susceptible to mass withdrawals that could exceed the available liquidity, a risk exacerbated by the 'on-demand' nature of its liabilities.

Centralized governance: despite its decentralized nature, the protocol shows a high dependence on its founder, Rune Christensen, and low voter participation, creating a key person risk and vulnerability to takeovers.

Regulatory risk: there is considerable uncertainty regarding future regulatory frameworks for DeFi protocols like Sky, which could affect its business model.

Weak earning capacity: Sky's earning capacity is considered weak, with a basic earnings-to-risk-weighted assets ratio of only 0.8%.

Nevertheless, these risk factors are partially offset by the protocol's solid track record since 2020, good management of cyber threats, with very limited credit losses thanks to its efficient automated liquidation mechanisms and modest profit generation, highlights S&P Global.