A DeFi yield grade is useful only if you understand what sits behind it. Litmus uses a published A-to-F methodology to turn several dimensions of pool quality into a single research signal.
The objective is not to predict which pool will make the most money. It is to make the underlying risk signals easier to compare and track over time.
What the Litmus grades mean
Litmus uses fixed thresholds rather than grading a pool relative to the other pools in the same snapshot.
| Grade | Score |
|---|---|
| A | 85 or higher |
| B | 72–84 |
| C | 60–71 |
| D | 45–59 |
| F | below 45 |
Because the thresholds are fixed, a pool can improve or deteriorate even if the rest of the market does not move in the same direction.
The four signals behind the score
The methodology combines four signals.
Liquidity - 30%
Liquidity measures how much value backs the pool and how deep the available market is.
A pool with stronger liquidity generally has more market depth to support users entering and exiting positions. It is still exposed to smart-contract, asset, oracle, and other risks, but liquidity provides an important part of the picture.
APY stability - 30%
APY stability measures how consistent the yield has been instead of rewarding a single unusually high reading.
This matters because temporary incentives can make a pool appear extremely attractive for a short period. Historical stability helps distinguish a persistent opportunity from a fleeting headline.
Reward quality - 25%
Reward quality examines how much of the advertised return represents underlying yield versus incentive emissions.
A high APY supported mainly by temporary token rewards can behave very differently from yield generated by lending demand, trading fees, or staking activity.
Data completeness - 15%
Data completeness measures how much of the relevant picture the available market data actually shows.
Incomplete information should increase uncertainty. It should not silently become a positive signal.
Why the methodology does not grade on APY
This is one of the most important design choices.
Litmus does not simply rank pools by APY and call the highest number the best opportunity. APY is an output that can change quickly. It can rise because of incentives, fees, utilization, or temporary market conditions.
By separating APY stability and reward quality from the headline yield, the methodology can identify situations where an unusually large return comes with weaker supporting signals.
Why grades are recorded historically
A current grade tells you what the model sees today. A historical grade tells you how that assessment changed.
Litmus publishes timestamped snapshots so researchers can compare the grade distribution across weeks and inspect individual pool changes. That makes the methodology itself easier to audit because the past record is preserved rather than overwritten.
For example, a pool moving from F to B and then back to F tells a different story from one that stays at B for months. Historical context is therefore part of the research product, not an afterthought.
What a grade does not tell you
An A grade does not mean a pool is risk-free. An F grade does not mean a pool will lose money.
The grade is a structured opinion based on the published signals. It does not replace smart-contract review, protocol research, token analysis, or your own assessment of whether a position is appropriate.
Litmus research is informational only. It is not investment advice, an audit, or a guarantee.
How to use grades in research
Use a grade as a starting point rather than an endpoint.
A sensible workflow is:
- Filter the market using the grade.
- Examine liquidity and historical APY behavior.
- Understand the source of rewards.
- Review the underlying protocol and assets.
- Compare the pool with historical observations.
- Verify the current conditions before acting.
This approach keeps the grade useful without treating it as a substitute for due diligence.
Explore the methodology
The complete weights and thresholds are available on the Litmus methodology page. Historical grade distributions are available through the public proof record.