Compound Wallet Risk Scoring (DeFi)

This project calculates a risk score (0–1000) for each Ethereum wallet address based on its on-chain behavior within the Compound V2/V3 protocolo. The goal is to identify wallets that present high default or liquidation risk based on real transactional data.

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🚀 How It Works

For every wallet:

1. Fetches transaction history via the Etherscan API
2. Filters interactions with Compound protocol contracts
3. Extracts and classifies borrow/supply/liquidation/repay activity
4. Computes a risk score using weighted, non-linear logic

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Input & Output

Input

• wallet id.xlsx
  Must contain a column with wallet addresses.

Output

• risk_scores.csv
  Format:

  wallet_id	score
  0xfaa0...ef2	200

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⚙️ Setup & Usage

pip install pandas requests openpyxl

# Set your Etherscan API key in api.py or directly in the script
python score_wallets.py

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Risk Scoring Logic Explained

Data Collection Method

• Transactions are retrieved using the Etherscan API:

  module=account&action=txlist&address=<wallet>
  

• Filtered only for transactions involving known Compound V2/V3 contracts.

Feature Selection Rationale

Feature	Description	Why It Matters
liquidations	Number of times wallet was liquidated	Reflects history of default
utilization ratio	Borrowed / Supplied	Measures how leveraged the wallet is
repayment ratio	Total repaid / borrowed	Indicates financial responsibility
inactivity	Days since last tx	Stale accounts with debt = hidden risk
borrow frequency	# borrows vs repays	Repeated borrowing = riskier
no-collateral borrow	Borrowing without supplying	Exposes the protocol to full loss

Scoring Method

Wallets start with a base score of 100, and are penalized based on the following:

Component	Max Penalty	Notes
Liquidation Risk	700	Exponential: 3+ liquidations = major penalty
Utilization Risk	200	Risk increases with higher leverage
Repayment Behavior	200	Less repayment = more risk
Inactivity	150	More days idle = more risk
Borrow Frequency	100	More borrows vs repays = more risk
No Collateral	100	Borrowing without supply = full penalty

Total score capped at 1000.

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Justification of Risk Indicators

• Liquidation is a direct sign of poor debt management.
• Borrowing without repayment is a strong default risk flag.
• High leverage (utilization ratio) leaves no margin for volatility.
• Inactivity makes wallets blind to liquidation risks.
• Collateral-free borrowing is highly abnormal and dangerous.

This framework is:

• Transparent and interpretable
• Protocol-aware
• Scalable to other protocols like Aave or Maker

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Sample Risk Score

0xfaa0768bde629806739c3a4620656c5d26f44ef2 → Score: 732

• 2 liquidations
• High utilization (91%)
• Repayment ratio: 0.3
• Last activity: 220 days ago

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