How the Bankless Score is Calculated

The Bankless Score combines three main factors—risk, sentiment, and diversification—along with transaction activity to measure your financial performance in the crypto, DeFi, and overall bankless ecosystem. Here’s how each component works...

1. Risk Calculation (R): How Safe or Risky is Your Portfolio?

Risk depends on the types of tokens you hold and their proportions. Each token type is assigned a weight based on its risk level:

• USD (Stablecoins): 0.1 (safest)
• Bitcoin/Ethereum: 0.3
• Blue Chip Tokens: 0.6
• Other Tokens: 1.0 (riskiest)

Step 1: Calculate Weighted Risk

For each token type:
Weighted Risk = (Percentage of Token × Risk Weight)
Add these values together for all token types.

Step 2: Normalize Risk

To scale the risk between 0% (safest) and 100% (riskiest):
Normalized Risk = ((Weighted Risk - 10) / 90) × 100

Example Portfolio:

• 40% USD, 30% Ethereum, 20% Blue Chips, 10% Other Tokens

1. Calculate Weighted Risk:
   • USD: 40% × 0.1 = 4
   • Ethereum: 30% × 0.3 = 9
   • Blue Chips: 20% × 0.6 = 12
   • Other Tokens: 10% × 1.0 = 10
     Total Weighted Risk = 4 + 9 + 12 + 10 = 35
2. Normalize Risk:
   Normalized Risk = ((35 - 10) / 90) × 100 = 27.78%

2. Sentiment Score (S): What’s the Market Mood About Your Tokens?

Sentiment measures market confidence in your tokens. Each token has a sentiment weight:

• Bullish: 1.0
• Neutral: 0.5
• Bearish: 0.0

Step 1: Normalize Portfolio

Remove any unrated tokens and scale the remaining percentages to 100%.
Normalized Percentage = (Original Percentage / Total Rated Percentage) × 100

Step 2: Calculate Sentiment Score

For each rated token:
Sentiment Contribution = (Normalized Percentage × Sentiment Weight)
Add these values together for all tokens.

Example Portfolio Sentiment:

• 40% Bullish, 30% Bearish, 20% Neutral, 10% Unrated

1. Normalize Portfolio:
   • Bullish: (40% / 90%) × 100 = 44.4%
   • Bearish: (30% / 90%) × 100 = 33.3%
   • Neutral: (20% / 90%) × 100 = 22.2%
2. Calculate Sentiment Score:
   Sentiment Score = (44.4 × 1.0) + (33.3 × 0.0) + (22.2 × 0.5) = 55.5%

3. Diversification Score (D): How Well-Balanced is Your Portfolio?

Diversification is measured with three sub-scores:

a) Distribution Score (40%)

This evaluates the balance of token percentages using the Herfindahl-Hirschman Index (HHI):
HHI = Sum of (Percentage of Each Token in Decimal Form²)
Distribution Score = ((1 - HHI) / 0.8) × 100

b) Category Coverage (30%)

This measures how many of the 5 main token categories (e.g., stablecoins, BTC/ETH, Blue Chips) are represented:
Category Score = (Number of Categories Represented / 5) × 100

c) Asset Balance Score (30%)

This measures the percentage of stable assets (USD):

• If Stable Assets < 20%: Balance Score = (Stable Assets / 20) × 100
• If Stable Assets > 40%: Balance Score = ((60 - Stable Assets) / 20) × 100
• If Stable Assets are between 20%-40%: Balance Score = 100

Final Diversification Score:

Diversification Score = (Distribution Score × 0.4) + (Category Score × 0.3) + (Balance Score × 0.3)

Example Portfolio:

• 30% Ethereum, 30% Bitcoin, 20% USD, 20% Blue Chips

1. Distribution Score:
   HHI = (0.3² + 0.3² + 0.2² + 0.2²) = 0.26
Distribution Score = ((1 - 0.26) / 0.8) × 100 = 92.5
2. Category Score:
   4 categories represented.
   Category Score = (4 / 5) × 100 = 80
3. Asset Balance Score:
   USD percentage = 20% (optimal range).
   Balance Score = 100
4. Final Diversification Score:
   Diversification Score = (92.5 × 0.4) + (80 × 0.3) + (100 × 0.3) = 91

4. Transaction Activity (T): How Active Are You?

This measures how your transaction count compares to the average user.
Transaction Score = min((Your Transactions / 20), 5)

Example:

If your transactions are 150% of the average user:
Transaction Score = min(150 / 20, 5) = 5

5. Final Bankless Score: Bringing it All Together

The final score combines Risk (R), Diversification (D), and Transaction Activity (T):

Step 1: Calculate Composite Score (C):

Composite Score = (((100 - Risk Score) × 0.5) + (Diversification Score × 0.5)) / 10

Step 2: Calculate Final Score:

Final Score = (((Composite Score + Transaction Score) / 15) × 100)

Example:

• Risk Score = 30
• Diversification Score = 80
• Transaction Score = 5

1. Composite Score:
   Composite Score = (((100 - 30) × 0.5) + (80 × 0.5)) / 10 = 7.5
2. Final Score:
   Final Score = (((7.5 + 5) / 15) × 100 = 83.33%

What Does the Bankless Score Mean?

• High Score (>80): Excellent portfolio and activity.
• Medium Score (50-80): Decent performance with room for improvement.
• Low Score (<50): Portfolio is risky, inactive, or poorly diversified.

Optimize your portfolio to maximize your Bankless Score and achieve financial freedom!