Tokenomics Audit for Startups
Our tokenomics audit process includes a thorough review of the economic model and the overall project structure. We identify potential weaknesses and propose improvements to ensure the integrity and efficiency of your tokenomics model. This audit is especially useful for startups looking to optimize their economic model and ensure its long-term viability.
Tokenomics Audit for Venture Capital
We understand the specific needs of venture capital investors. Our tokenomics audit provides a detailed and objective evaluation of the project's economic model, highlighting its strength and viability to attract significant investments. This service is ideal for investors seeking an in-depth understanding of the project's economic structure before committing their capital
Tokenomics Audit Process
The tokenomics audit serves as a rigorous assessment of the token economy, aiming to scrutinise its design, functionality, and alignment with the overarching business model. Through a structured approach, the audit systematically examines the critical aspects of the token's design and function, utilising a question-based methodology to evaluate its economic health.
This evaluation not only identifies potential strengths and areas of improvement but also offers recommendations to enhance the token's robustness and resilience in the face of market dynamics.
Busines-Token Interaction
We evaluate whether the token enhances the business model, if it is a complement or a fundamental part, and what its added value is.
Scope
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Relevance to Business Model: Assess whether the tokens enhance the current business model or if they are merely a supplementary feature.
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Essentiality: Determine if the token is crucial for the business model’s operation.
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Value Generation in Fiat: Evaluate if the project can generate value in fiat terms, regardless of the token's performance.
Structural Analsys
We evaluate the input of value and monetary circulation, as well as the creation of value and the need for critical mass due to interactions and agents.
Scope
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Cash Flows: Analyze the inflow of value (e.g., fiat) into the token economy.
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Value Retention: Examine if the value remains within the token economy or if there is immediate selling pressure.
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Ponzi-like Elements: Check for any elements resembling Ponzi schemes.
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Economic Agents and Mechanisms: Assess if interactions generate additional value in fiat and if the project requires a critical mass for value generation.
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Incentive Nature: Determine if incentives are speculative or have underlying value.
Demand Drivers
Analyze if the demand is based on factors that can be controlled, if there are strategies to influence it, and if it is supported by tangible economic value.
Scope
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Controllable vs Uncontrollable Factors: Identify if demand drivers are influenced by factors within the project’s control or external conditions.
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Demand Levers: Evaluate if the economy has mechanisms to influence demand.
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Economic Value Generation: Determine if demand drivers depend on real economic value generation or speculative factors.
Governance
We identify the risk of protocol takeover and friction points in the mechanisms.
Scope
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Takeover Risk: Majority takeovers can undermine decentralization. Auditors assess token distribution and implement safeguards like capped voting power.
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Governance Efficiency: Active participation is crucial for fair governance. Auditors identify participation barriers and recommend simplifying voting processes.
Allocation and Distribution
Determine if the distribution favors speculative practices or creates selling pressures.
Scope
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Pump-and-Dump Risk: Analyze if the allocation encourages pump-and-dump schemes.
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Stake Distribution: Evaluate if certain actors receive unnecessarily large stakes.
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Sell Pressure: Determine if the distribution creates unnecessary sell pressure.
Empirical Proof
We seek evidence or examples that the mechanisms employed in the project have worked successfully in the past.
Scope
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Mechanism Validation: Auditors verify the success of the project's mechanisms by examining empirical evidence. This involves reviewing data and case studies to ensure the mechanisms work as intended and contribute to the project's goals.
Resilience
Measure the token's performance against shocks and analyze its behavior in simulations.
Scope
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Shock Exposure: Assess how the token withstands shocks, with ratings from -2 (highly vulnerable) to 2 (highly resilient).
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Appreciation Simulation: Check if the token appreciates under simulation or if specific functionalities negate this question.
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Feedback Loops: Identify feedback loops that could accelerate a crash, similar to the Terra/Luna scenario.
Final Score Results
After conducting the audit, a final score is obtained that functions similarly to a country's credit rating, with the highest solvency reflected in a 'AAA' rating and the lowest in a 'D' rating.
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