The incorrect design of a protocol can lead to malfunctioning and loss of trust and interest from users and investors. It is essential to thoroughly question, test, and optimize a protocol before its launch. An audit is a crucial step in ensuring that the protocol is designed in the most effective and efficient way to fulfill its intended purposes.

Services

The economic audit consists of different complementary pillars that can be conducted individually or together:

• Economic Principles: We analyze if the designed protocol aligns actors and incentives according to modern economic theory. Proper design of incentives and mechanisms, such as fees, rewards, interest rates, and price levels, is essential for a functioning and attractive ecosystem.
• Mathematical Validation: We validate the mathematical formulas that are the cornerstones of the mechanisms that drive the functioning of your protocol. This includes checking that the mathematical formulas described align with the mechanisms that are supposed to create the desired incentive structure of the protocol.
• Plausibility Analysis: We conduct a plausibility analysis to ensure that the protocol's design and parameterization produce realistic and attractive outcomes. By conducting this analysis, we can help to ensure that the protocol is successful and that it meets the needs and expectations of its stakeholders.
• Financial and Agent-Based Modelling: Simulation techniques have become a standard tool for analyzing cryptoeconomic systems. Simulations or suitable agent-based models can help understand if and under which conditions the chosen design incl. its parameters results in a reasonable outcome, and whether it affects the different groups as intended (see also Agent-Based Modelling).
• Game Theoretical Analysis: Game Theory is an economic concept that examines the interactions between agents who act in their own interests and do not trust each other. By using Game Theory, we can theoretically analyze whether a protocol design will result in the intended outcome even in a system where no one trusts each other.

Our economic audit is a comprehensive evaluation of the design and function of a protocol, with a focus on ensuring that it is effective, efficient, and produces the intended results for all stakeholders. By conducting an economic audit, we can help to improve your protocol.

Deliverables

We provide you the following deliverables:

Presentation	Report