> For the complete documentation index, see [llms.txt](https://docs.stakingrewards.com/defi-ratings/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.stakingrewards.com/defi-ratings/rating-methodology/framework-and-pillars/questions.md). # Questions ## List of Questions ### Security #### Smart Contract Security | Whats the risk of an on-chain protocol exploit? | | ---------------------------------------------------------------------------------------------------------------------------------------- | | Have all core contracts that hold or route funds been independently audited? | | Who performed the most recent audit and what is their reputation tier? | | Have upgrades to core contracts been followed by new audits? | | Have all critical and high-severity audit findings been fully remediated and re-verified? | | Are core contracts upgradeable and how tightly are upgrades constrained? | | Has any on-chain exploit or critical bug affecting user funds occurred, were affected users compensated and were post-mortems published? | | Has any confirmed rug-pull event occurred? | | Were there reductions to the timelock delay that weaken governance protections and if so, have they been communicated transparently? | | Does the protocol run an active bug-bounty via a reputable platform (e.g. Immunefi, Code4rena)? | | Are real-time security monitoring and alerting systems in place? | | Are automatic safety controls (e.g. pause, circuit breakers) triggered by monitoring alerts? | #### Key Management & Permissions | What is the risk of an off-chain protocol exploit? | | ----------------------------------------------------------------------------------------------------------------------------------------------------- | | Who controls admin and upgrade keys for (proxy-) contracts holding user funds and have previous changes been documented? | | Can any single key move user funds or upgrade custody contracts? | | How decentralized and robust is the multisig for critical actions and have modficiations to the signing configuration been documented? | | How constrained are pause, blocklist and withdrawal-control permissions? | | Are all user assets held in non-custodial smart contracts? | | Are user funds fully segregated from treasury and operational wallets? | | What are the whitelisted protocols the vault strategy can interact with, how restirctive is it to the mandate and how are modifications permissioned? | | Is there a tested incident playbook for admin-key compromise or signer loss? | ### Strategy #### Protocol Mechanics | How likely does the yield source goes negative? | | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | | What are the sources of yield aligned with the mandate of the vault or protocol? | | Under which conditions does net yield become negative or cause loss? | | Is leverage or rehypothecation used and up to what effective level? | | Are there automated mechanics to prevent Liquidation Events (health rate, LTV thresholds) | | Has this strategy or a close variant ever experienced negative yield? | | Is a risk framework for vault curation or protocol mechanics documented? | | Is current yield sustainable relative to underlying economics? | | Can the position be fully or mostly unwound under conservative liquidity assumptions without slippage, penalties, or lockups turning expected yield negative? | | Does the strategy rely on a spread, peg, or funding rate that can invert (e.g. basis trades, stablecoin pegs, LST discounts, market making)? | | Can automated or externally-invocable mechanisms increase vault exposure without real-time human approval? | #### Collateral | How likely is a collateral depeg? | | ---------------------------------------------------------------------------------- | | Which assets are accepted as collateral and how are they risk rated? | | How did each collateral behave versus its underlying during past stress or depegs? | | How concentrated is exposure to any single collateral or LST? | | How is validator or slashing risk handled for staking-based collaterals? | | What share of TVL relies on bridged or wrapped assets? | #### Infra Counterparty Exposures | How likely does a malfunction of counterparty Chain, Bridge, Oracle, Wallet, Validators, APIs, Frontends or CEX affect the principal? | | ------------------------------------------------------------------------------------------------------------------------------------- | | Which chains, bridges, oracles, wallets and CEXs does the strategy depend on and how are they risk rated or tiered? | | How redundant are oracle and bridge setups, and can oracle values be corrected under abnormal conditions? | | Are off-chain infrastructure providers certified by standard IT security audits like SOC 2 or ISO27001 or VSP? | | How did these infra components behave in past outages or chain incidents? | | Has the base chain recently halted block production, experienced consensus failure or become non-operational? | | Has the validator set experienced slashing events that could impact staked collateral? | | Are validators diverse geographically and by operator? | | Can any single infra component failure alone block withdrawals or cause losses? | #### Protocol Counterparty Exposures | How likely does a malfunction of counterparty protocol affect the collateral? | | -------------------------------------------------------------------------------------------------------- | | Into which external protocols, CEXs or RWA platforms is collateral deployed and how are they risk rated? | | Are revenue-share or incentive arrangements documented and do they create conflicts of interest? | | Are there hard limits and rebalancing rules per counterparty? | | How quickly and safely can positions be unwound from each counterparty? | | Are third-party validators, custody providers or asset managers disclosed? | #### Liquidity | How likely is it that 100% of the collateral can be withdrawn within the stated withdrawal period? | | ----------------------------------------------------------------------------------------------------------------------- | | How are withdrawals executed and are they enforced permissionlessly on-chain or can they be paused, blocked or delayed? | | Is there enough liquidity and market depth to redeem close to 100% of TVL within the stated withdrawal time? | | Have there been past withdrawal delays queues or freezes and does the avg processing time match expectations? | | Do caps or limits restrict timely redemptions during high utilization? | | How does exit liquidity behave during volatility and network congestion? | | Do withdrawals rely on unstaking, vesting, or bridge exits longer than the stated period? | | Does redemption depend on secondary-market liquidity and is it sufficient? | | What is the liquidity depth of collateral and receipt tokens? | | What is the risk of bank-run scenarios under full utilization? | #### Market | What happens in a market black-swan event or high market volatility? | | ----------------------------------------------------------------------------------------------------------- | | How has the LST or receipt token peg performed under market stress? | | How likely can adverse moves in broader crypto markets cause permanent losses due to directional exposure? | | Are interest rate/incentive models robust during TVL shifts or volatility spikes? | | Have historic scenarios with high market volatility been explicitly modeled for the strategy? | | Can sharp price moves trigger forced liquidations that crystallize losses before positions can be adjusted? | ### Operations #### Governance | How likely can governance changes or capture cause losses or block withdrawals? | | -------------------------------------------------------------------------------------------------------------------------------------- | | What governance model controls protocol changes and upgrades? | | How concentrated is voting power among top holders or delegates and how active transparent and user-aligned is governance in practice? | | Are mechanisms in place to limit major changes in scope and time like timelocks and veto or delays? | | Can the protocol replace the strategy manager without blocking user withdrawals and how is this governed? | #### Team & Legal & Compliance | How robust is the team and legal setup in protecting my collateral from fraud or seizure? | | ------------------------------------------------------------------------------------------------------------------------------------- | | Are core team and operating entities publicly identified and credible? | | Is the protocol dependent on a single developer or a small team, and does this ensure optimal management for the strategy? | | What legal entity and jurisdiction operate the protocol and/or assets? | | Are there known investigations or regulatory actions related to the entity? | | Is there an on-call and incident response process for core teams and strategy managers? | | Does the team provide timely support for critical user or integrator issues? | | Are major investors or strategic partners disclosed? | | Does the strategy manager manage similar vaults and does it introduce a conflict of interest introducing sub-optimal risk descisions? | | Has the strategy manager previously been involved in products with collateral loss or materially adverse curation decisions? | #### Documentation & Transparency | How clearly does the protocol explain what happens to my collateral and when I could lose it? | | ------------------------------------------------------------------------------------------------------------- | | Is there up-to-date documentation explaining architecture, strategy mechanics, and risks? | | Is it clearly documented how collateral is used and when loss occurs? | | Are all contract, proxy and implementation addresses documented in one canonical place and verified on-chain? | | Are roles, permissions and timelocks documented with a visible change history? | | Does the protocol publish proof-of-reserves and where applicable proof-of-liabilities? | | Are all contracts verified on the leading block explorers? | #### Financial Resilience | How likely can the protocol absorb shocks without passing permanent losses to depositors? | | ------------------------------------------------------------------------------------------------------------------------- | | Is there backstop reserve or safety module for user losses and is there any guarantee it will be used in a loss event? | | How large and liquid are the backstop reserves and treasury relative to TVL and are they held in low-risk, liquid assets? | | What is the estimated operational runway at current burn for operational teams and managers? | | How have TVL revenue and buffers behaved in past stress events? | | Can the protocol remain safe in maintenance mode if team disappears? | ## Resources Excel Sheet with questions: [GitHub](https://github.com/stakingrewards/defi-risk-rating/blob/master/framework.md).