Asset Due Diligence
8 assessment areas for evaluating tokens, stablecoins, LSTs, LRTs, and LP tokens before allocation. Complements the General DD framework.
The 8 DD Areas
Asset Due Diligence requires a comprehensive review of mechanics, liquidity, risks, and regulatory posture. Evaluate every asset across these eight critical vectors before allocation. Always cross-reference with our automatic red flags.
1. Asset Mechanism and Design
- How the asset maintains its value or peg
- Redemption mechanics and guarantees
- Underlying backing and collateral structure
- Rebasing vs. reward-accruing design
2. Ownership and Supply Distribution
- Token concentration and whale analysis
- Vesting schedules and unlock events
- Team and investor allocations
- Supply cap and inflation mechanics
3. Liquidity and Market Depth
- DEX and CEX liquidity across venues
- Slippage at various trade sizes
- Historical liquidity stability
- Market maker presence and reliability
4. Volatility and Price Behaviour
- Historical price volatility metrics
- Correlation with major assets
- Behaviour during market stress events
- Peg deviation history (for stablecoins)
5. Smart Contract Implementation
- Token contract audit status
- Proxy patterns and upgradeability
- Admin functions and permissions - watch for missing timelocks
- Blacklist or freeze capabilities
6. Incentives and Sustainability
- Source of yield or rewards
- Emission schedule and runway
- Dependency on token price
- Long-term viability of incentive model
7. Dependencies and External Risks
- Oracle dependencies for pricing - see oracle security
- Cross-chain bridge exposure - assess via cross-chain risk
- Reliance on external protocols
- Single points of failure
8. Regulatory and Issuer Risk
- Issuer jurisdiction and legal status
- Regulatory compliance posture
- Censorship and freeze risk
- Counterparty exposure to issuers
Foundational governance, security, and economic design evaluation →
Lending platforms, DEXs, yield vaults, and derivatives protocols analysis →
L1s, L2s, and infrastructure layer security and decentralization analysis →
Critical warning signs that immediately disqualify any opportunity →
Explore the Full DD Framework
Asset due diligence is just one pillar. View our complete methodology for securing institutional allocations.
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