Risk Assessment Methodology

1. Overview

WalletShield is an onchain counterparty risk monitoring platform built for merchants, solo operators, and Web3 payment receivers. It helps users identify high-risk payer wallets before and after receiving funds, reducing freeze, review, and appeal costs.

All assessments are based on publicly available blockchain data and risk models. WalletShield does not custody assets, access private keys, or execute onchain transactions.

2. Data Sources

WalletShield analyzes the following public data sources:

• Onchain transaction history — full transaction records from supported blockchains
• Address entity tagging — known entity labels from public databases and community-maintained lists
• Blacklist and sanctions data — publicly available address blacklists and flagged entities
• Fund flow patterns — inflow/outflow analysis, interaction paths, and mixing behavior indicators
• Activity patterns — transaction frequency, volume anomalies, and dormancy signals

No private or off-chain personal data is used in risk assessments.

3. Risk Scoring

Each wallet address receives a risk score from 0 to 100, where higher scores indicate higher risk. The score is calculated from multiple weighted factors:

• Blacklist exposure — direct or indirect interaction with flagged addresses
• Fund flow risk — suspicious inflow/outflow patterns or mixing behavior
• Interaction risk — connections to high-risk entities or known bad actors
• Activity anomalies — unusual transaction frequency, volume spikes, or dormancy patterns
• Overall assessment — combined weighted score across all factors

4. Risk Levels

Risk scores map to the following risk levels:

• Low — No significant risk signals detected. Standard monitoring recommended.
• Medium — Some risk indicators present. Enhanced monitoring suggested.
• High — Multiple risk signals detected. Manual review recommended before accepting payments.
• Critical — Severe risk indicators. Immediate action recommended — consider stopping interactions.

5. Assessment States

Each address assessment has a lifecycle state:

• Clean — No actionable risk signals found at the time of assessment.
• Warning — Risk signals detected that warrant monitoring or review.
• Confirmed — Risk signals verified through multiple data sources.
• Resolved — Previously identified risks have been mitigated or are no longer relevant.
• Expired — Assessment data is outdated and should be refreshed.

6. Supported Chains

WalletShield currently supports:

• Ethereum (ETH) — including ERC-20 token transfers (USDT, USDC, etc.)
• TRON (TRX) — including TRC-20 token transfers
• BNB Smart Chain (BSC) — including BEP-20 token transfers

These are the most widely used chains for USDT payments and Web3 commerce. Additional chain support is planned.

7. Limitations

WalletShield risk assessments have the following limitations:

• Assessments are based on publicly available data and may not capture all risk factors.
• Risk scores and levels are informational only — they do not constitute legal, financial, or compliance advice.
• Blockchain data may be delayed, incomplete, or unavailable for recently created addresses.
• A low-risk score does not guarantee that an address is safe or compliant.
• A high-risk score does not confirm that an address is involved in illegal activity.
• Users should independently verify important conclusions before making business decisions.

8. Updates

WalletShield continuously improves its risk models, data sources, and scoring algorithms. Methodology updates are reflected in assessment results without advance notice. For questions about the methodology, contact [email protected].