Economic & Risk Services
Mechanism Design Review
A mechanism design review for DeFi and Web3 protocols with game-theory analysis, incentive mapping, and agent-based stress tests to prevent economic exploits and align user behavior with protocol goals.
150+
audits
completed
$10B+
in client
assets protected
$200B+
in transacted
value secured
300+
crit / high issues found
Consolidated clients
With 3+ years
of blockchain security experience
We turn incentive design into measurable protocol performance. Instead of theorizing, we size economic leakages, expose profit-seeking deviations, and deliver parameter updates that improve depth, stability, and user fairness.
What is a Mechanism Design Review?
We fine-tune incentive mechanisms so rational behavior aligns with protocol goals, eliminating economic leakages and delivering fair, sustainable interactions. This ensures, fairness and sustainability in protocol interactions often alongside solidity audits and a thorough dapp security audit.
Why a Mechanism Design Review Matters
Blockchain failures aren’t only code bugs, they’re often incentive bugs: mispriced fees, mercenary rewards, exploitable oracle windows, or keeper games that push the system into bad equilibria.
A single flaw can result in:
Economic leakage and value extraction
User harm via manipulation or griefing
Instability in liquidity, governance, or markets
Our mechanism design review surfaces and fixes incentive flaws before launch. We map agents and payoffs, test strategies with game-theory and simulations, and tune parameters so rational behavior aligns with protocol goals, from testnet to mainnet
Our Approach to Mechanism Design Review
Choosing the right mechanism design partner isn’t about theory, it’s about ensuring rational behavior drives the outcomes you want. We map agents and payoffs, pressure-test with game theory and simulations and recommend minimal-change parameter updates so value doesn’t leak. For end-to-end coverage, pair with a Smart Contract Audit and Tokenomics Audit.
Each Three Sigma review is tailored to your protocol’s goals, market, and constraints. We deliver clear, implementable changes, backed by reasoning and reproducible tests.
AMMs & DEXs
Pricing rules, fee paths, liquidity incentives, routing externalities.
Lending & Liquidations
Collateral and auction design, keeper economics, bad-debt prevention.
Derivatives & Structured Products
Funding/insurance flows, payout shaping, settlement and oracle timing.
Common Mechanism Design Review Issues
Mercenary liquidity & emissions drift
Reward curves pay for TVL without depth or volume. Emissions leak to rent-seekers, then churn as incentives decay.
Fee / rebate path leakage
Routing and rebates create side channels where intermediaries capture value, reducing LP/APY and warping flow.
Oracle timing & manipulation windows
Short TWAPs, thin sources, or delayed finality let attackers move price into settlement, triggering unfair liquidations or payouts.
Keeper / liquidator coordination games
Penalties and auction rules encourage waiting or collusion, causing bad-debt spikes and unstable recovery.
MEV-amplified rules
Priority, batch, or inclusion policies make honest flow sandwichable or back-runnable, extracting value from users and LPs.
Sybil & airdrop farming incentives
Point or reward logic favors identity splitting and low-cost grinding over real usage, degrading community quality and metrics.
Funding / interest miscalibration
Perps or lending rates don’t reflect inventory and risk, positions drift, inventories clog, and volatility is amplified.
Collateral and liquidation cliff effects
Stepwise parameters create sharp thresholds, users are incentivized to race or grief others at the boundary.
Governance attack surfaces
Quorum sniping, vote buying, and bribery loops distort outcomes, delegations and thresholds fail to protect minority interests.
A Mechanism Design Review applies game-theoretic analysis and simulation to size these risks, tune parameters, and prioritize minimal-change guardrails.
Our Mechanism Design Review Process
Scoping and Planning
Define objectives, success metrics, and interfaces in scope, align assumptions, constraints, and target behaviors.
System Modeling
Map agents, states, actions, payoffs, and constraints, extract implicit rules from code/Docs and identify invariants.
Mechanism & Parameter Review
Evaluate pricing rules, fees/rebates, emissions, lockups, auctions, oracle windows, and governance guardrails.
Simulation and Stress Testing
Run agent-based and Monte Carlo scenarios, vary parameters to expose profitable deviations and edge-case regimes.
Recommendations and Tuning
Deliver severity-ranked issues with minimal-change parameter updates, redesign options, and clear acceptance criteria.
Verification
Re-run simulations after changes, check equilibrium outcomes, and issue a concise confirmation of improved posture.
Deliverables You Can Expect
As part of a Three Sigma Mechanism Design Review, you receive a decision-oriented report that identifies incentive misalignments, describes plausible exploit paths, and prioritizes changes by likely impact. Recommendations focus on parameter tuning and lightweight guardrails, with reasoning and supporting analysis.
Post-audit support is included
with the option for full verification of fixes before deployment. Discover how we protect teams like yours in our Case Studies.
Who is this for?
AMMs, order books, RFQ venues
Lending, collateralized debt, liquidations
Derivatives: perps, options, structured products
Staking and emissions programs
Governance frameworks and incentive votes
Industries We Secure
Our audits have helped secure decentralized applications across multiple verticals.
DeFi &
Liquidity
Lending platforms, DEXes, staking, and collateral markets.
NFT &
Collectibles
Marketplaces, launchpads, minting tools, and creator hubs.
Gaming &
Metaverse
Play-to-earn games, trading hubs, and immersive 3D worlds.
Cross-Chain Infrastructure
Bridges, oracle networks, and cross-chain protocol layers.
Frequently Asked Questions
Check out the Mechanism Design F.A.Q.
What do you need from us to start?
A short kickoff, current docs/diagrams, parameter tables, read-only repo access, and any dashboards or simulators you already use. Optional: historical metrics (volume, liquidity, liquidations) to calibrate simulations.
How is this different from a tokenomics audit?
"Tokenomics audit focuses on supply, distribution, and economic narratives. Mechanism design focuses on **rules of interaction** and whether rational actors can exploit them. They complement each other.",
Can you also review our app/admin surfaces?
If your risks touch UI payloads or admin tools, we pair with a dApp security audit to cover those paths.
Do you support non-Solidity stacks?
Yep, Move and Rust are in scope, we regularly coordinate with our Move smart contract audit while keeping the overall process lean.
How do you measure success in a mechanism design review?
We define success metrics up front (e.g., lower extractable value, healthier liquidity depth, stable funding/interest, reduced bad debt). After changes, we re-run scenarios to confirm improvements against those metrics.