Economic Audit & Simulation

Three Sigma's economic audit is a comprehensive quantitative evaluation of a DeFi protocol's financial incentive structures, using simulation and game-theoretic modeling to surface economic attack vectors and systemic risks that are invisible to traditional code audits.

What the Economic Audit Covers

The audit stress-tests the protocol against simulated market pressures including price manipulation scenarios, liquidity crunches, governance attacks, vampire attacks, and incentive misalignment. The review analyzes tokenomics, capital flows, incentive mechanisms, staking design, oracle dependencies, and systemic risk exposures — then validates findings through quantitative modeling under real-world market conditions.

Process

• Scoping and Planning — Defining engagement scope, timeline, and key focus areas.
• Research and Analysis — Studying protocol architecture, documentation, and economic parameters.
• In-Depth Review — Assessment of economic vulnerabilities, inefficiencies, and systemic risks.
• Validation — Quantitative modeling and simulation under varied market scenarios.
• Reporting and Recommendations — Prioritized findings with actionable parameter changes.
• Ongoing Support — Continuous advisory as market conditions and protocol parameters evolve.

Mechanism & Governance Simulation

For protocols with governance systems or complex on-chain mechanisms, Three Sigma applies game-theoretic analysis to identify Nash equilibria and dominant strategy exploits — including flash loan voting attacks, low-participation governance capture, and incentive misalignment in auction and fee designs.

Ecosystem Risk Modeling

The ecosystem risk assessment extends simulation beyond the protocol boundary, mapping oracle price feed manipulation risk, bridge failure scenarios, sequencer centralization exposure, and correlated liquidation cascades from integrated DeFi protocols. This provides a holistic view of economic exposure that no single-protocol audit can capture.