DefiLlama Just Rated 128 Tokens From AAA To CCC

DefiLlama And Forgd Launch Ratings For 128 Crypto Tokens

19h15 ▪8min read ▪ byLuc Jose A.
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Two entities from the crypto ecosystem, DefiLlama and the Web3 investment bank Forgd launch Universal Token Ratings, recently developed a ranking aimed at evaluating 128 tokens based on their market functioning and transparency. Uniswap is the only project to obtain the AAA rating, while 25 other cryptos received an AA. This system relies on the terminology of classical rating agencies but does not measure default risk. It mainly interprets liquidity, volumes, token unlocks, and the quality of information published by various projects.

In brief

• Universal Token Ratings covers 128 tokens with ratings ranging from AAA to CCC.
• Uniswap ranks first with 60.8 points out of 100.
• The rating combines a transparency score and a market performance score.
• The ranking does not evaluate either the upside potential or the default risk of the token.

Uniswap obtains the only AAA rating in the ranking

While the crypto market picks up, DefiLlama in collaboration with Forgd announced on August 26 the launch of Universal Token Ratings or UTR. The dashboard assigns each token a numeric score out of 100, followed by a rating between AAA and CCC.

At launch, a total of 128 tokens were evaluated. The top spot was taken by Uniswap with an AAA rating and a score of 60.8 points. Moreover, the project received 7.87 out of 10 for its public information and 7.72 for its market performance.

The Meteora protocol came in second place. It totaled 59.87 points, just below the AAA category. The top ten included the projects Curve DAO, Raydium, o1exchange, ether.fi, Jito, Dogecoin, Zama, and Pyth Network with an AA rating.

Cryptos that received an AA rating also included Solana, Zcash, Aave, Optimism, Avalanche, zk, Optimism, Avalanche, Sync, and Arbitrum. Tokens such as Worldcoin, Pendle, Ondo, Polygon, NEAR, and Hyperliquid were in the A category. Injective, Filecoin, and Celestia received a BB according to the ranking, while Sui received a BBB.

Dogecoin, Solana, and Zcash are also present in this ranking. This presence reveals that the scope is not limited exclusively to DeFi protocol tokens. The dashboard also covers various areas, including blockchain infrastructures, memecoins, decentralized exchange platforms, staking, real-world assets, as well as artificial intelligence.

The ratings evolve as the data changes. The work presented by DefiLlama and Forgd is thus evolving, as the entities do not wish to produce a definitive evaluation. According to their official presentation, a protocol can lose points as soon as its liquidity deteriorates, if its price spreads increase, or if a token unlock does not match the disclosed schedule.

The rating multiplies transparency and market performance

Two axes individually rated out of 10 allow Universal Token Ratings to create this ranking. The first, called the Disclosure Axis, serves to measure the quality, completeness, and updating of information disseminated by the project.

This part specifically examines the identity of the main actors, team organization, legal structures, cash flow statements, as well as financial flows. It also considers token release schedules, token distribution, multisignatures, audits, relations with exchanges or market makers.

As for the second axis, known as the Performance Axis, it allows verification of the actual market functioning. Moreover, it also takes care of analyzing volumes, liquidity depth, various spreads between buying and selling prices, as well as the number of available exchange platforms and compliance with conditions on derivative products.

Many other data concern the ratio between valuation and fully diluted market capitalization, token unlocks, token buybacks, and compliance with various commitments made by market managers. Forgd highlights that its infrastructure monitors more than 500 protocols and 35 liquidity provisioning companies. The final rating assigned does not correspond to an average. However, it is obtained by multiplying the two axes.

For example, the determination of Uniswap’s rating allows verification of this formula. Thus, when multiplying its transparency score, 7.87, by its performance score 7.72, one obtains 60.76 points. This result is then rounded to about 60.8 out of 100.

Such a calculation methodology requires a balance between the two axes. A protocol that scores 9 out of 10 in performance but only 3 in transparency ends with 27 points. The lack of information on the team, treasury, or distribution schedule cannot therefore be compensated for by significant liquidity.

The converse is also true. The score of 9 can be achieved by a project following the publication of detailed information on the first axis. However, if its market only receives 3 considering low depth or high spreads, its final rating remains limited to 27.

Controllable on-chain events are inserted without a protocol having to send a new file. An unexpected token unlock as well as a new listing can then change the result. Many other market parameters nevertheless rely on averages determined over the previous 30 days. A progressive update therefore does not mean that each price or volume change directly induces a new rating.

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An AAA rating that measures neither yield nor default risk

DefiLlama and Forgd compare their system to the evaluations used for decades by rating agencies like Moody’s, Fitch, and S&P. Thus, the choice of letters consolidates this visual proximity. However, the meaning of ratings remains very different.

At the heart of traditional finance, the AAA rating illustrates a highly elevated capacity to meet financial commitments. Agencies determine the solvency of an issuer or the risk of non-repayment of a bond, as noted by the definition from S&P Global Ratings.

A token is not necessarily a debt. It does not necessarily guarantee repayment. The AAA rating of Uniswap does not therefore mean that UNI has the same risk profile as a AAA-rated bond. It simply means that the crypto obtains the same result according to UTR’s specific criteria.

Thus, the score does not evaluate the complete security of the protocol either. Conducting an audit is part of the information examined; however, it does not promise the absence of vulnerabilities in a smart contract. All regulatory risks, governance, actual concentration of power, or the ability of a protocol to progressively generate revenue are also not covered by this ranking.

The final rating is furthermore neither a price target nor a purchase recommendation. A well-ranked crypto can see its value decrease when the market undergoes a correction or if initial capitalization is excessive. Conversely, a lower-rated token can experience speculative gain despite limited transparency.

The interest of the new ranking may now depend on its ability to detect deteriorations before they are visible on prices. Rating changes, arguments provided during these revisions, and the extension of the number of tokens will help determine whether UTR becomes an excellent market risk indicator or remains primarily a comparative tool.

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Luc Jose A.

Diplômé de Sciences Po Toulouse et titulaire d’une certification consultant blockchain délivrée par Alyra, j’ai rejoint l’aventure Cointribune en 2019.
Convaincu du potentiel de la blockchain pour transformer de nombreux secteurs de l’économie, j’ai pris l’engagement de sensibiliser et d’informer le grand public sur cet écosystème en constante évolution. Mon objectif est de permettre à chacun de mieux comprendre la blockchain et de saisir les opportunités qu’elle offre. Je m’efforce chaque jour de fournir une analyse objective de l’actualité, de décrypter les tendances du marché, de relayer les dernières innovations technologiques et de mettre en perspective les enjeux économiques et sociétaux de cette révolution en marche.

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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