Asset Composition (40%)

Asset methodology: category-specific dimensions, evidence-backed scoring, cap cascade, hard-fail controls, staleness penalties, and Aave lending market construction.

Asset quality is the irreducible risk floor. The asset model scores assets by category against explicit dimensions, then applies non-compensatory caps.

1) Category Taxonomy

Category	Examples	Primary failure mode
native	ETH, WETH	Chain halt / liveness failure
fiat_backed_stablecoin	USDC, USDT, PYUSD	Issuer insolvency, reserve shortfall
cdp_stablecoin	DAI, USDS, LUSD, GHO	Collateral cascade, governance attack
synthetic_stablecoin	USDe, USD0, eUSD	Basis unwind, funding inversion
lst	wstETH, cbETH, rETH	Slashing and withdrawal risk
lrt	weETH, ezETH, rsETH	AVS/slashing aggregation risk
wrapped_btc	WBTC, cbBTC, tBTC	Bridge/custodian failure
governance_token	LINK, UNI, ARB	Volatility and liquidity shock
unreviewed	Any unclassified asset	Unknown / insufficient assessment

2) Dimension-Based Scoring

The weighted formula depends on category. Core dimensions include:

peg_stability
issuer_custody
redeemability
reserve_transparency
governance_controls
protocol_security
operator_quality
bridge_mechanism
dependency_depth
liquidity
volatility

Dimension weights are defined in the active methodology configuration.

3) Cap Cascade (Non-Compensatory)

Final asset score is the minimum of the weighted dimension score and all active caps.

final_asset_score = min(
  weighted_dimension_score,
  overlay_cap,
  review_status_cap,
  hard_fail_cap,
  override_cap,
  staleness_cap
)

Review status caps

reviewed → 10.0
provisional → 9.0
unreviewed → 8.0

For provisional or missing-evidence contexts, the default dimension fallback is conservative (2.5).

4) Overlays

yield_bearing: score constrained by wrapper/underlying dependency.
lockup: liquidity dimension is down-weighted.

5) Hard-Fail Controls

Hard-fail flags apply strict caps regardless of weighted dimension quality. When a flag is active, the final asset score cannot exceed the listed cap, even if the rest of the evidence is strong.

All flags:

sanctions_exposure → cap 0.0
active_depeg → cap 1.0 (7-day cooldown)
redemption_paused → cap 2.0 (3-day cooldown)
single_signer_upgrade → cap 3.0
endogenous_collateral_high → cap 4.0 (14-day cooldown)
proof_of_reserve_missing → cap 4.0 (30-day cooldown)
unaudited_token_contract → cap 4.0
no_recent_attestation → cap 5.0 (30-day cooldown)

Flags are event-sourced and may include trigger windows and cooldowns.

6) Staleness Penalties

Evidence freshness affects effective dimension values:

stale (now > fresh_until): value × 0.92
expired (now > fresh_until + 90d): value reduced to 75% of original with a minimum floor of 5.0
if the stale/expired weighted share exceeds a threshold, a global staleness cap applies

7) Unresolved Address Fallback

If an adapter cannot resolve an exposure address, scoring falls back to strict unreviewed behavior:

asset score constrained to a conservative low cap
explainability includes a machine-readable unresolved-address reason

8) Portfolio-Level Adjustments

After per-exposure asset scoring, portfolio penalties are applied at the vault level:

concentration penalty
category correlation penalty
wrong-way risk penalty

These adjustments prevent concentrated portfolios from appearing safer than diversified equivalents with similar average exposure quality. Single-asset vaults are exempt from concentration and correlation penalties.

9) Aave v3 Lending Markets (Deposit-Weighted Composite)

For single-sided lending markets on Aave v3, the asset vector is not the deposit asset alone. A depositor in an Aave pool is exposed principally to the token they supplied, and secondarily — via the shared liquidation engine — to the other active reserves in the same pool.

To reflect this, the Aave lending asset score is a 70/30 weighted composite:

asset_score_aave_lending
  = 0.70 * score(deposit_asset)
  + 0.30 * weighted_mean(
      score(other_active_reserves),
      weight = reserve_share_of_pool,
      filter = reserve_share >= 1%
    )

Deposit asset (70%). The token the user directly holds a claim on.
Pool reserves (30%). Other reserves in the same pool, weighted by their share of pool exposure, filtered to reserves making up at least 1% of the pool so that dust reserves do not distort the composite.

The 70/30 split reflects that institutional depositor risk in a single-sided Aave market is dominated by the deposited asset, with cross-collateral risk entering as a secondary factor that is materially mediated by liquidation bonuses, isolation mode, e-mode boundaries, and the Aave liquidation engine.

Dimension-level scoring, cap cascade, hard-fail flags, staleness handling, and the portfolio adjustments above all apply to both the deposit-asset component and the pool-reserve component before they are combined.

Asset Composition (40%)

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