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While the categories below illustrate core evaluation angles, the assessment is not limited to these items. Additional dimensions may be considered based on the protocol’s structure, documentation, and risk profile.

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Area 1: Technical Security

Evaluates how robust the code is and how well the protocol is designed to withstand external attacks.
Evaluation ItemChecklist / Points to VerifyImportance
Audit
  • Which firm conducted the audit? (e.g. top-tier firms preferred)
  • How many audits have been conducted? (minimum of 2 recommended)
  • What were the findings, and were all Critical/High issues resolved?
  • Is the audit report publicly available?
Highest
Bug Bounty Program
  • Is there an ongoing bug bounty program on platforms like Immunefi or HackerOne?
  • Is the bounty size appropriate (high rewards relative to TVL indicate strong security confidence)?
High
Track Record
  • How long has the protocol been live on mainnet without major issues?
  • Is there any history of hacks or fund losses and, if so, how were they handled?
High
Admin Key Structure
  • Do admin keys exist that can alter core protocol settings?
  • If yes, are they managed via multisig, and who are the signers?
High
Dependencies
  • Which oracle is used (e.g., Chainlink, Pyth – reliable providers)? What are the price-oracle mechanisms?
  • If the protocol is built on another protocol, is the base layer considered secure?
Medium
Code Disclosure & Documentation
  • Is the code fully open-sourced on GitHub?
  • Is developer documentation complete and well maintained?
Medium

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Area 2: Economic Security

Evaluates whether the protocol’s yield sources, tokenomics, and risk mechanisms are sustainable and resilient even under extreme market conditions.
Evaluation ItemChecklist / Points to VerifyImportance
Liquidity
  • For lending protocols (especially for curators), is the collateral high-quality and reliable?
  • For lending protocols: Is utilization rate appropriate? (if utilization is consistently above 85–90%, withdrawals may be delayed or blocked, so real-time monitoring is required)
  • For DEX/AMM: Is pool TVL sufficient to handle expected deposits and withdrawals?
  • For RWA or private credit: Are there explicit lock-up periods or redemption cycles (for example, 30-day lockup, weekly redemption)?
  • Has the protocol handled large withdrawal events smoothly in the past?
Highest
Yield Source Consistency
  • Where does the yield come from (token emissions versus organic fee-based revenue)?
  • If rewards are in a native token, is inflation sustainable over the long term?
High
TVL and Volatility
  • Is TVL sufficiently large (for example, TVL greater than 50 million USD for more than 3 months can be considered solid, and greater than 100 million USD can be considered strong)?
  • Is TVL relatively stable, without sharp fluctuations that indicate dependency on short-term institutional or mercenary yield-farming capital?
High
Liquidation / Deleveraging Mechanisms
  • For lending or perp DEXs: Do liquidation mechanisms function reliably in volatile markets?
  • For yield-bearing stablecoins: Are there structural risks of depeg or death spiral?
  • For all protocols: Is there any aggressive looping or leverage that could amplify losses?
High
Insurance / Safety Fund
  • Is there an insurance or safety fund to compensate users in case of unexpected losses?
  • Are its size and trigger conditions clearly defined?
Medium

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Area 3: Operational & Governance Trust

Evaluates how trustworthy and transparent the operating team or DAO is.
Evaluation ItemChecklist / Points to VerifyImportance
Team Structure & Reputation
  • Is the team anonymous or public (public teams generally earn higher trust)?
  • For curators: Does the operations team have proven ability to select and manage sub-strategies and risks?
  • Do team members have prior experience running successful projects?
High
Off-chain Operational Risk
  • Does the protocol rely on off-chain custody or trading?
  • Which custody provider is used (Copper, Fireblocks, Ceffu, etc.)?
  • Is proof of reserves available in real time or via regular reports?
  • Is off-chain transparency ensured (for example through dashboards or attestations)?
High
Governance Transparency
  • How are key decisions made (e.g., transparent forums and on-chain voting)?
  • Is the community (Discord, Telegram, etc.) active, and does the team engage well with users?
Medium
VCs and Partners
  • Which VCs have invested?
  • Are there partnerships with reputable protocols or infrastructure providers?
Low

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Final Evaluation & Application

Each checklist item can be scored quantitatively. Additionally, for “Highest Importance” items, a Pass/Fail criterion can be applied: if even one such item fails, the protocol is automatically disqualified.