#DeFiGetsGraded DeFi projects are graded or assessed to help investors and users gauge their safety, reliability, and potential. Here’s how it’s generally done:

1. Economic Safety and Risk Assessment:

- DeFi Pulse Economic Safety Grade: DeFi Pulse, in collaboration with Gauntlet Networks, introduced a grading system (0–100 scale) to measure the risk of insolvency for DeFi protocols, particularly those involving lending with user-supplied collateral. Higher scores indicate safer protocols. For example, Compound scored 91% and Aave 95% in early assessments, based on real-time data like price movements and borrowing patterns. This helps users understand the risk of losing funds if a protocol becomes insolvent.

- DeFiSafety Protocol Reviews: DeFiSafety evaluates DeFi protocols based on a transparent, standardized process, focusing on code quality, documentation, testing, and security practices. They assign scores (0–100%) to reflect protocol safety, with over 340 protocols reviewed across 24 blockchains. For instance, Ethereum-based protocols average a 68% score, while lower scores may indicate weaker security or transparency.

2. Key Metrics for Evaluation:

- Total Value Locked (TVL): TVL measures the total funds locked in a protocol, indicating its popularity and trust. For example, Uniswap’s TVL exceeded $5 billion in October 2024, signaling strong market confidence.

- 24-Hour Trading Volume: High trading volume reflects active use and liquidity, while low volume may suggest limited interest.

- Price-to-Sales Ratio:

3. Decentralization and Security:

- DeFiScan Framework: DeFiScan assesses decentralization stages (0–2) and centralization risks (High, Medium, Low) based on factors like chain reliability, upgradeability, autonomy, and exit windows. Stage 0 protocols have centralized risks, while Stage 2 protocols are fully decentralized with robust governance.

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