Soft factors

Not everything in DeFi comes down to code or numbers. Soft factors are the human and social elements that can make or break a project, such as team credibility, community support, and how long the protocol has been running. These don’t directly expose users to immediate loss, but they can influence how likely problems are to happen or get resolved.

Shift includes soft factors in its risk framework because behind every decentralized protocol are real people. If a team is public, experienced, and well-funded, they’re more likely to fix issues fast and manage crises well. But if a team is anonymous, inexperienced, or underfunded, even a small bug can spiral into a major failure.

These soft factors help Shift form a full picture of each protocol’s long-term viability and the likelihood of future problems.

What we look at

Total value locked (TVL)

The more assets locked in a protocol, the more users are trusting it. High TVL signals strong traction and market confidence.

Time since launch

The longer a project has been live, the more data we have on how it performs under pressure. New protocols carry higher risk just because they’re untested.

Funding and backers

Well-funded projects backed by reputable investors tend to have better resources for hiring, audits, and development. Weak or unknown funding raises questions about sustainability.

Team transparency and track record

Is the team public and reputable, or anonymous? A public team with a solid history builds trust and accountability. Anonymous teams aren’t disqualifying – but they’re a risk factor.

Governance quality

Decentralized governance (e.g., a DAO with active participation and vote delays) shows maturity and resilience. Over-centralized or inactive governance can be a red flag.

Fork history

Is the project an original or a copy? Forks can be risky if the team doesn't fully understand or improve the code. But forks of well-audited, successful protocols can also be strong bets if executed well.

Auditing and security practices

Who audits the project? How often? Projects audited by top firms and with public bug bounty programs show a strong security culture. “Working on an audit” is often a warning sign.

Example: soft factor review – Aave v3 (ethereum)

Here’s how these soft factors apply to Aave V3:

• TVL: With over $22 billion locked, Aave leads the entire DeFi lending sector. That scale reflects deep user trust.

• Time in market: Launched in May 2020, Aave has survived and evolved through bull and bear markets, which is proof of real-world resilience.

• Funding: Aave raised $30 million from top VCs, giving it runway to build carefully, hire top talent, and run extensive audits.

• Team: Fully public, highly experienced, and widely respected in the crypto space. That transparency significantly reduces risk.

• Governance: Governed by a DAO with proposal and voting mechanisms, plus a timelock before changes go live. This structure prevents unilateral decisions and adds security.

• Fork origin: Aave is not a fork — it’s a foundational protocol in DeFi. For forked versions like Sparlend, Shift would look for audit-backed confirmation that the fork replicates Aave’s trusted structure.

• Security: Aave V3 has undergone multiple audits by leading firms like OpenZeppelin and Trail of Bits. Any material issues were addressed, further boosting confidence.

These soft factors aren’t just fluff — they’re critical for seeing the full risk picture. A bug in code is serious, but whether it gets fixed fast or becomes a disaster depends on the people and structure behind the protocol. That’s why Shift weighs soft factors alongside technical and economic ones in every decision.