How We Calculate Risk Scores
Our platform safety analysis evaluates cryptocurrency exchanges and lending platforms across four key factors to help you make informed decisions about where to store and earn on your crypto.
Why Platform Safety Matters
The cryptocurrency industry has seen numerous exchange failures, hacks, and fraud cases that have resulted in billions of dollars in user losses. From Mt. Gox in 2014 to FTX in 2022, these events highlight the critical importance of evaluating platform safety before depositing your assets.
Our risk scoring methodology provides a standardized framework for comparing platform safety. Each platform receives a score from 1-5 stars based on objective, verifiable criteria. While no scoring system can guarantee safety, our methodology helps identify platforms with stronger regulatory oversight, financial transparency, and operational track records.
The Four Scoring Factors
Regulatory Status
+2 pointsRegulatory licensing is the most important factor in our scoring (+2 points). Licensed platforms must meet strict capital requirements, undergo regular audits, and follow consumer protection rules. Operating without a license in major jurisdictions often indicates higher risk.
Recognized regulators include:
Proof of Reserves
+1 pointProof of Reserves (PoR) audits verify that a platform holds sufficient assets to cover all customer deposits. We award +1 point for platforms that publish regular third-party audits from reputable accounting firms. This transparency helps ensure your assets are actually there.
Recognized auditors include:
Track Record
+1 pointA clean operational history demonstrates consistent security and business practices. Platforms must have operated for at least 3 years with no major security incidents or regulatory issues to receive +1 point. Time reveals vulnerabilities that new platforms haven't faced.
Disqualifying incidents include:
- Security breaches resulting in loss of customer funds
- Withdrawal freezes or insolvency events
- Regulatory enforcement actions or fines
- Fraud allegations or misleading practices
Insurance Coverage
+1 pointInsurance provides an additional layer of protection against losses from hacks, theft, or operational failures. Platforms with insurance coverage from reputable providers receive +1 point. Coverage limits and terms vary, so this is a positive indicator rather than a guarantee.
Insurance types we recognize:
- Custodial insurance (cold storage protection)
- Crime insurance (theft and fraud coverage)
- Digital asset insurance (hot wallet protection)
Understanding the Score
| Score | Rating | Risk Level | What It Means |
|---|---|---|---|
| 5 | 5 out of 5 stars | Excellent | All safety factors present. Regulated, audited, established, and insured. |
| 4 | 4 out of 5 stars | Good | Strong safety profile. Missing one factor, typically insurance. |
| 3 | 3 out of 5 stars | Moderate | Basic safety measures. Typically regulated but lacking PoR or insurance. |
| 2 | 2 out of 5 stars | Limited | Minimal safety measures. May be regulated but lacks transparency. |
| 1 | 1 out of 5 stars | Minimal | No verified safety factors. Exercise extreme caution. |
Important Limitations
Our risk scores are informational tools, not financial advice. Please consider these limitations:
- Scores don't measure platform features, fees, user experience, or interest rates
- Compliance data may not reflect the most recent changes
- A high score doesn't guarantee platform safety or solvency
- Regulatory status varies by your jurisdiction - a platform licensed elsewhere may not be licensed where you live
Always do your own research before depositing funds with any platform.
Compare Platform Safety
View risk scores alongside interest rates to find the right balance of returns and safety for your crypto.
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