> 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/ratings-scale.md).

# Ratings Scale

### Rating Scale

We use a letter scale from **AAA to D**:

* **AAA–BBB-**: Qualified Grade - Suitable for most risk-aware allocators, given due diligence.
* **BB+–B-**: Elevated Grade - For allocators who actively underwrite and monitor risk.
* **CCC+–C**: High-Risk Grade - Treat as venture risk to principal.
* **D**: Default - Permanent loss event has occurred.

<figure><img src="/files/4tMEgogscS0pd86bXcoq" alt=""><figcaption></figcaption></figure>

The rating is derived from a **numerical score** based on the framework described below. We publish:

* The **overall letter rating**
* The **pillar scores** for **Security, Strategy, and Operations**

### Probability-of-Loss Interpretation

Our DeFi rating expresses our **view on the likelihood that a user will suffer permanent capital loss** on deposited collateral over the next six months.

At this stage of the DeFi market, there is **insufficient long-run default data** to derive statistically robust probability-of-default (PD) curves for each rating band. Accordingly, our scale is:

* **Ordinal** (AAA indicates lower loss likelihood than AA, which is lower than A, etc.)
* **Informed by structured expert judgement** and comparative analysis across protocols
* **Not yet calibrated to precise numerical PD estimates**

As we collect more incident data over time, we will:

* Measure **incident frequencies per rating band**
* Adjust our thresholds and internal PD assumptions as needed
* Publish **annual calibration reports** describing how observed outcomes compare to our rating expectations.

Until then, ratings should be interpreted as **relative indicators of loss likelihood**, not as exact probabilities.

### Review Frequency and Real-Time Triggers

* **Full reassessment** of each protocol at least every **12 months**
* **Continuous monitoring** of selected **real-time metrics** (e.g., major depegs, contract pauses, slashing events, large withdrawals, governance changes, negative rate updates)

Significant events can trigger a rating invalid until it’s reassessed fully:

* A major **protocol upgrade** outside the normal schedule
* A **major operational** change, like a new manager, etc.

This acknowledges that DeFi is highly dynamic and that a static, point-in-time rating is not sufficient.

### Recency

Each rating reflects our current assessment of permanent capital-loss risk.\
We perform a full reassessment every 12 months to incorporate structural and macro changes.\
Because conditions in DeFi can shift quickly, we continuously monitor key quantitative metrics and may update a rating at any time if material risks change.

Note: Not all risk factors can be monitored continuously. A rating is most accurate when recent and should be interpreted with increasing caution as it ages.