The pillars when combined determine the credit score, VaR, exit/rebalancing signals, and allocation caps.

Tokenized Private Credit & RWA Allocations

Pillar 1: Credit

Counterparty Regulatory standing, operating history, AUM, audit quality, institutional recognition.
Collateral & LTV Collateral type, collatarization, liquidation mechanism.
Diversification Sector and factor concentration.
Ratings Equivalence Formal or implied rating via comparable spreads, historical loss rates, or peer mapping.
Default History Live or prior default events, expected recovery rate, resolution timeline, stress-cycle behaviour.

Pillar 2: Liquidity

Redemption Terms Redemption frequency, notice period, and capacity cap per window.
Lock-Up & Gates Hard lock-ups, soft discretionary gates, suspension clauses, withdrawal queues.
Underlying Liquidity How quickly underlying assets can be realized to fund redemption under stress.
Secondary Market DEX or OTC market depth, daily volume, bid/ask spread, price impact at size.
Stress Track Record Whether redemptions were honored in full during prior market stress events.

Pillar 3: Legal Structure

Jurisdiction Regulatory regime governing the vehicle.
Token Holder Claim Direct beneficial ownership vs. contractual claim vs. smart contract balance — insolvency hierarchy.
Bankruptcy Remoteness SPV/fund isolation from issuer insolvency; true-sale structure, independent trustee, legal opinion.
Documentation OM, subscription agreement, legal opinions, audit. Gaps become enforcement gaps.
Enforcement Precedent Whether this structure has been tested and enforced in a contested wind-down or default.

Pillar 4: Accounting

Fair Value Hierarchy FASB ASC 820 / IFRS 13 level — from quoted market prices (L1) to management model (L3).
NAV Independence Who calculates NAV — independent administrator under regulatory mandate vs. self-reported.
Pricing Frequency How often NAV is struck and pushed on-chain; staleness window this creates.
Provisioning Method IFRS 9 forward-looking ECL vs. incurred loss model that only provisions post-default.
Audit & Trail Annual external audit, NAV certificates with professional liability, accessible records.

Pillar 5: Oracle & Verification

Attestation Independence Who co-signs NAV before it is pushed — custodian co-attestation vs. operator self-push.
Transmission Security Multi-sig controls, timelocks, deviation circuit breakers on the NAV push path.
Mechanical Verifiability Whether token holders can independently reconstruct NAV from on-chain data alone.
Credit Observability Availability of borrower health data, covenant compliance, and audited financials.
On-Chain Consumption Whether the smart contract validates incoming NAV — deviation limits, smoothing, challenge windows.

DeFi Allocations

Pillar 1: Smart Contract Risk

Audit Coverage Scope and quality of audits relative to deployed code; outstanding critical/high severity findings.
Upgrade Mechanism Proxy architecture, admin key configuration, timelock duration.
Admin Controls Multisig threshold and signer independence; EOA admin on user funds is an automatic block.

Pillar 2: Economic Risk

Collateral Parameters LTVs, liquidation thresholds, and incentive design — are liquidators profitable at realistic stress prices.
Utilisation Dynamics Borrow rate behaviour at the kink; risk of liquidity lock at high utilisation.

Pillar 3: Oracle Risk

Feed Design Spot vs. TWAP vs. aggregated; manipulation resistance; deviation limits and circuit breakers.
Update Frequency Staleness windows relative to redemption or liquidation timelines.

Pillar 4: Governance Risk