Overview
Circular includes a multi-dimensional credit rating system that assigns letter grades to individual lending markets and managed vaults. Ratings provide a familiar scale for assessing risk at a glance, similar to traditional fixed-income credit ratings. Each rating is computed from multiple independent risk dimensions, then combined into a single composite grade.Grade Scale
Grades can carry +/- modifiers (e.g., AA+, BBB-) for finer differentiation within each band.
Scoring Dimensions
Ratings are computed across four independent dimensions, each capturing a different aspect of risk.
Market Risk evaluates how stable and predictable a market’s behavior is over time. Markets with volatile utilization, erratic APY, or shallow liquidity are scored lower.
Collateral Quality assesses the underlying collateral token’s maturity, trading liquidity, and historical price stability. Established tokens with deep on-chain liquidity score higher than newer or thinly-traded assets.
Oracle Reliability measures the trustworthiness of the price feeds that a market depends on. Markets using well-known oracle providers with fresh, redundant data feeds receive higher scores. Stale or single-source oracles are penalized.
Concentration Risk examines how depositor capital is distributed within a market. Markets dominated by a small number of large depositors are more vulnerable to sudden withdrawal shocks and score lower.