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
| Grade | Meaning |
|---|
| AAA | Highest quality, minimal risk |
| AA | Very high quality, very low risk |
| A | High quality, low risk |
| BBB | Good quality, moderate risk |
| BB | Speculative, elevated risk |
| B | Highly speculative, high risk |
| CCC | Substantial risk |
| CC | Very high risk |
| C | Near default |
| D | Default or non-functional |
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.
| Dimension | What It Measures |
|---|
| Market Risk | Utilization stability, APY volatility, liquidity depth, TVL trends |
| Collateral Quality | Token liquidity and maturity, price volatility characteristics, depeg risk |
| Oracle Reliability | Price feed provider reputation, data freshness, feed redundancy |
| Concentration Risk | Depositor distribution, single-entity exposure, withdrawal impact |
Token Tiers
Collateral tokens are classified into tiers based on market maturity and liquidity depth. This classification feeds into the Collateral Quality dimension.
| Tier | Examples |
|---|
| Blue-chip | ETH, WBTC, USDC, USDT, DAI |
| Established | wstETH, rETH, cbETH, sDAI |
| Mid-tier | weETH, USDe, FRAX, crvUSD |
| Emerging | Chain-native tokens, governance tokens |
Vault Ratings
Vault ratings aggregate the ratings of underlying markets, weighted by the vault’s capital allocation to each market. Vaults with concentrated allocations or significant leverage exposure receive penalties. This means a vault allocated to a single high-rated market may score lower than one diversified across several markets of comparable quality.
| Tool | Description |
|---|
get_market_rating | Credit rating for a specific lending market with dimension breakdown |
list_by_rating | Browse and filter markets by credit rating |
get_rating_methodology | Reference documentation for the rating framework |
get_vault_rating | Credit rating for a Morpho vault with underlying market breakdown |
list_vaults_by_rating | Browse and filter vaults by credit rating |
