Dimension 2: Economic Soundness
Robustness of economic model against flash loans, MEV, liquidation cascades, and incentive misalignment under stress.
What We Measure
We assess the robustness of a protocol's economic model under adversarial conditions. This includes flash loan resistance and atomic manipulation vectors, MEV exposure at the protocol level (not user-level sandwich attacks), liquidation mechanism health under cascading stress, incentive alignment between all protocol participants, oracle dependency in pricing and accounting, yield sustainability and Ponzi risk indicators, and whether the protocol's economic invariants hold under extreme market conditions. We distinguish between user-level economic risks (like being sandwiched) and protocol-level economic risks (like bad debt accumulation or insolvency).
What Raises This Score
Flash accounting that makes atomic manipulation part of the design rather than a vulnerability
Proven liquidation mechanisms that have survived real market stress events
No share-inflation or first-depositor attack surfaces
Overcollateralization with tested buffer mechanisms
Economic model validated through multiple market cycles (Black Thursday, Terra/Luna, FTX)
Sustainable yield sourced from real economic activity, not token emissions
Bounded MEV — protocol-level extraction is impossible by design
What Lowers This Score
Untested economic models with no production stress history
Flash loan vectors that can manipulate pricing or accounting
Liquidation mechanisms that cascade under correlated stress
Incentive structures that rely on continuous new capital inflow
Single-oracle dependency for critical pricing decisions
Unbounded bad debt accumulation without socialization mechanisms
Token economics that require infinite growth assumptions
Why This Weight
At 13%, Economic Soundness reflects that economic exploits are the second-largest category by dollar loss. Flash loan attacks, oracle manipulation for profit extraction, and liquidation cascade failures have collectively drained billions. The weight acknowledges that while access control breaches are more common, economic attacks can be equally devastating when they succeed.