Index safety score explained
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While the strategy allocation score is used to calculate strategy allocation within the index, the overall index score is a summarized assessment of anti-risks with more generalized criteria, mostly adapted from Yearn. The score is a simplified safety rating designed to provide users with an estimation of the risk of a particular index.
The index is evaluated in terms of the complexity of the internal processes within the index. Does the index utilize a few simple strategies like staking or does it have complex mechanics such as leverage, risk of liquidation, and involvement with multiple protocols?
In case of urgency, indexes with simple strategies are easier and faster to withdraw, which increases the chances of saving funds.
5
The index consists of simple strategies and can be exchanged for the notional token by the Locus team easily. These indexes are less likely to incur losses.
4
The strategies inside the index are relatively simple and easy to withdraw but it might have some low-risk mechanics.
3
The index has the potential for losses like high withdrawal fees or requires detailed queue management to prevent losses.
2
The index uses leverage or debt, and is not easy to unwind.
1
The index is highly complex, uses leverage or debt and is not easy to unwind
Each strategy within the index is evaluated by the lifetime parameter. This estimates the time that the strategies have been operational with no critical issues and changes in the code base. The total average score of the index is determined from all strategy scores.
5
Strategies used have been running for 8+ months
4
Strategies used have been running for 4+ months
3
Strategies used have running for 1-4 months
2
Strategies used have been running for less than one month
1
Strategies used have been live for less than two weeks
Protocols Safety evaluates the resilience of the protocols the index uses. It considers the safety measures given the current DeFi security standards, based on our internal assessments and due diligence compared to the top projects in DeFI. This includes multi-sig health, decentralization, bounty programs, audits, etc.:
5
Protocols involved are trusted blue chip protocols with a good track record of security. For example Maker, Uniswap, Curve, AAVE, and Compound.
4
DD took place. Protocol contracts are audited/verified by at least two reputable audit firms. A multi-sig with an appropriate threshold is required and/or contracts are immutable. Has a good bounty program.
3
DD took place. Protocol contracts are audited/verified by at least one reputable audit firm. A multi-sig with an appropriate threshold is required and/or contracts are immutable. Has a good bounty program.
2
DD took place. Protocol contracts audited/verified. A multi-sig is required or contracts are upgradeable. Multisig has a low threshold of signers. No bounty program.
1
No due diligence (DD) document for this strategy. The protocol contracts used are very recent and not audited/verified. An EOA (externally owned account) owns the contracts and can upgrade them.
