Tokenomics audit

Tokenomics deals with token design and distribution. A tokenomics audit provides an independent opinion on whether a project's tokenomics is feasible and consistent with its goals and environment.

When designing tokenomics, a project faces many different options and tradeoffs. The large number of options makes it difficult to define a reasonable design and token distribution strategy. As a result, blockchain projects often present interesting stories that are not feasible or not in line with their tokenomics. A tokenomics audit helps to verify whether the project's story fits its tokenomics and tells the project owner how to improve it.

Services

For a tokenomics audit, we use the following established tools:

• Economic Review of Whitepaper: An economic review consists of verifying that the described tokenomics is in line with economic and financial theory. We thereby map different actors, present how they interact with each other, and describe their incentives. This overview helps to identify potential pitfalls and verify that the tokenomics design is in line with the projects’ goals.
• Benchmarking: Most projects have at least some similarities to established projects. In early times, there was a good chance that a new project would develop a tokenomic system that had never existed before. Today, it is likely that a new project will have at least some similarities to existing projects. Thus, we compare the project tokenomics with the outcome of similar projects.
• Financial and Agent-Based Modelling: Simulation techniques have become a standard tool for analyzing cryptoeconomic systems. Tokenomic simulations or suitable agent-based models can help understand if and under which conditions the chosen tokenomics design results in a reasonable outcome, and whether it affects the different groups as intended. In addition, it helps to assess the feasibility of certain allocations and how they might affect prices. Using different financial and monetary methods, we create a model that suits the audit question and check the question in line (see also Agent-Based Modelling).
• Game Theory: Game Theory is an economic concept that describes the interplay of decisions of agents and the most likely outcome of their interactions, assuming everyone behaves only in their own interest. Traditionally, it assumes that these agents do not trust each other. It is thus the fundamental basis of Bitcoin and other mechanisms that have been designed in a trustless manner. This theoretical framework is, therefore, another useful method to audit blockchain projects. With Game Theory, we theoretically analyze whether the tokenomics results in the intended outcome even if nobody in the system trusts each other.

For audits regarding the design of the protocol (i.e., incentive design, platform design, consensus algorithm) see our section on Protocol Audit.

Deliverables

We provide you the following deliverables: