Launchpad Due Diligence: Ensuring the Security and Integrity of Your Tokenization Project


21 Jun 2023
Launchpad Due Diligence: Ensuring the Security and Integrity of Your Tokenization Project

Over the past few years, tokenization has surfaced as an innovative technology with immense potential to transform numerous industries. Through blockchain implementation, artificial intelligence, and cryptocurrencies, companies can tokenize their assets and services, facilitating fractional ownership, improved liquidity, and heightened transparency. Nevertheless, addressing the intrinsic risks linked to this cutting-edge approach is crucial as tokenization gains traction.

Mitigating risks in tokenization initiatives necessitates conducting extensive due diligence, especially when employing launchpads. Launchpads function as platforms that aid in fundraising and initiating tokenized projects. Ensuring the security and integrity of these initiatives is vital to protect investor interests and establish trust in the tokenization environment.

What does Launchpad Due Diligence mean?

Launchpad due diligence is the exhaustive evaluation process conducted before participating in a tokenized project via a Launchpad platform. It entails thoroughly inspecting various project aspects, such as technical infrastructure, legal compliance, team expertise, market potential, and community engagement. The objective is to detect any potential dangers, susceptibilities, or warning signs that may affect the project's success or jeopardize investor funds' security.

Serving as a precautionary measure, launchpad due diligence confirms that tokenized projects comply with stringent standards of safety, clarity, and regulatory adherence. It offers prospective investors and contributors an in-depth understanding of the project's viability, trustworthiness, and associated risks. By performing due diligence, participants can make educated choices and reduce the chances of falling prey to scams or poorly executed initiatives.

Considering both technical and non-technical facets, launchpad due diligence encompasses a multidimensional evaluation. Beyond scrutinizing a project's whitepaper or its technological framework, it delves into appraising team capacity, legal conformity, and market feasibility. Through this stringent assessment procedure, launchpad due diligence strives to safeguard investors and guarantee the enduring success of tokenization endeavors.

By underscoring the importance of launchpad due diligence, tokenization participants can reduce risks, amplify project credibility, and contribute to the overall expansion and stability of the tokenization ecosystem. In the sections below, we will examine the necessity of due diligence for tokenization projects and explore the fundamental elements of launchpad due diligence.

The Necessity of Due Diligence in Tokenization Projects

Tokenization projects present exciting prospects for businesses and investors by allowing fractional ownership of assets and establishing new methods of value exchange. Nevertheless, these opportunities are accompanied by inherent risks that must be thoroughly assessed and managed through due diligence. Here are various reasons explaining the importance of due diligence for tokenization projects

Fraud Prevention and Risk Mitigation

Identifying and alleviating possible risks associated with tokenization projects is a crucial function of due diligence. It assists in exposing deceptive schemes, scams, and false claims that can mislead investors and other participants. Thorough due diligence can reveal potential warning signs, helping participants avoid fraudulent endeavors and secure their investments.

Trust and Security

Tokenization projects frequently employ blockchain technology and smart contracts, necessitating strong security measures. Evaluating the security mechanisms, code quality, and possible vulnerabilities within the underlying technical infrastructure is facilitated by due diligence. A technical audit can uncover potential security hazards, which can be addressed to ensure the tokenization project's dependability and integrity.

Regulatory Compliance

Adherence to legal and regulatory standards is vital to the long-term triumph and stability of tokenization projects. Due diligence encompasses examining and determining the project's compliance with relevant laws, regulations, and recommendations. This analysis includes assessing the project's obedience to Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols, securities laws, and data protection regulations. Compliance with regulations mitigates legal risks while boosting investor and stakeholder confidence.

Protection for Investors

Conducting due diligence is essential to safeguarding investors' interests in tokenization projects. By scrutinizing a project's whitepaper, team qualifications, and financial forecasts, prospective investors can evaluate the project's feasibility and potential return on investment. Comprehensive due diligence aids in recognizing projects featuring solid business models, skilled teams, and viable growth probabilities—thereby minimizing the chance that investors will lose their funds to ill-conceived or fraudulent initiatives.

Credibility and Reputation

Launchpad due diligence enhances the overall esteem and reliability of the tokenization ecosystem. By performing extensive evaluations, both launchpad platforms and project teams showcase their devotion to accountability and ethical practices. Projects that emphasize due diligence and supply thorough documentation encourage confidence in potential investors, drawing more participants and cultivating a thriving, sustainable tokenization environment.

Essential Elements of Launchpad Due Diligence

A thorough assessment process is vital in launchpad due diligence, addressing multiple crucial components to guarantee the security, reliability, and success of tokenization initiatives. Examining these aspects enables potential investors and participants to make educated choices and minimize tokenization-related risks. The following are the main components of launchpad due diligence

In-Depth Project Assessment

This component involves a detailed evaluation of the tokenization project, including examining its whitepaper and scrutinizing its business model, roadmap, financial forecasts. Determining the project's feasibility and scalability is essential to predict its likelihood of success. Furthermore, comprehending the market consequences and competitive environment can offer insights into the project's sustainability and long-term growth potential.

Technical Inspection

Performing a technical review is crucial for evaluating the security and functionality of the blockchain infrastructure underpinning the tokenization initiative. This component consists of scrutinizing the project's smart contracts, conducting code assessments, and analyzing the network architecture. Identifying and addressing possible vulnerabilities, bugs, or inadequacies in the code through examining technical aspects ensures a strong and secure foundation for the tokenization endeavor.

Abiding by relevant legislation and regulations is vital for a tokenization project's legitimacy and long-lasting success. Launchpad due diligence encompasses an exhaustive review of legal documents such as terms of service, privacy policies, and regulatory submissions linked to the project. Ensuring compliance with Know Your Customer (KYC), Anti-Money Laundering (AML) regulations, securities laws, and data protection regulations is imperative to minimize legal risks and safeguard participant interests.

Team Examination

Evaluating the proficiency, background, and credibility of the project team is a key aspect of launchpad due diligence. This assessment entails reviewing team members' qualifications, experience, and accomplishments. Exploring their past projects, roles, and contributions to the blockchain and cryptocurrency sectors helps establish their capability and likelihood of successfully executing the tokenization project. A qualified team with a strong reputation inspires confidence in investors and stakeholders.

Market and Community Analysis

Assessing the project's community involvement, social media footprint, and market perceptions is crucial to estimating its potential adoption and achievement. Launchpad due diligence incorporates evaluating the project's engagement across various channels, such as Telegram, Twitter, or Discord, to comprehend community support and interaction levels. Moreover, performing market analysis and understanding the competitive landscape offer valuable insight into potential market positioning and demand for tokenized products.

By addressing these essential components during launchpad due diligence, potential investors and participants can obtain a comprehensive view of a tokenization project's strengths, weaknesses, risks, and possible rewards. Rigorous evaluations of the project as a whole, its technical facets, legal compliance, team capabilities, and market dynamics contribute to making well-informed investment decisions and promoting a secure and reliable tokenization environment.

Advantages of Launchpad Due Diligence

There are numerous advantages to performing launchpad due diligence, particularly for those involved in tokenization projects. By emphasizing the importance of due diligence, both investors and stakeholders can protect their interests. The following are the primary advantages of launchpad due diligence.

Guaranteeing Investor Protection

A critical protective measure for investors is provided by launchpad due diligence. In-depth evaluations can identify and prevent possible scams, deceptive projects, and inadequately executed initiatives. Due diligence reveals red flags and warning signs, allowing investors to make educated decisions and reduce the likelihood of losing their investments. Establishing trust and confidence in the tokenization ecosystem is made possible by safeguarding investors' interests.

Boosting Project Credibility

Rigorous due diligence serves to increase the credibility and trustworthiness of tokenization projects. Launchpad platforms and project teams that prioritize due diligence demonstrate their dedication to transparency, responsible operations, and high-quality standards. Comprehensive assessments and thorough documentation grant prospective investors access to vital information for gauging a project's credibility. A well-prepared due diligence report can entice additional investors, form partnerships, and promote long-term project success.

Recognizing Red Flags and Reducing Risks

Identifying potential risks and weaknesses related to tokenization projects is made possible through launchpad due diligence. Various factors, including a project's technical infrastructure, legal compliance, team abilities, and market analysis, are evaluated to detect potential red flags. This proactive strategy allows participants to handle issues before they escalate into major problems, reducing project failure likelihood as well as fraud or security breaches.

Supporting Informed Decision-Making

Comprehensive information for informed investment decisions is supplied by launchpad due diligence. Thorough evaluations of a project's feasibility, scalability, legal compliance, and team expertise enable investors to determine the likelihood of project success. This empowers them to balance risks and rewards, tailor investment strategies, and select projects that correspond with their objectives and risk tolerance.

Fostering the Tokenization Ecosystem's Healthy Development

Participants contribute to the tokenization ecosystem's overall growth and stability by carrying out launchpad due diligence. In-depth assessments aid in identifying and supporting legitimate projects with solid foundations, skilled teams, and viable business models. This cultivates an atmosphere that encourages responsible innovation while drawing more participants, investors, and businesses to the tokenization arena.

In summary, launchpad due diligence provides substantial benefits, such as ensuring investor protection, bolstering project credibility, spotting red flags, enabling informed decision-making, and fostering the tokenization ecosystem's healthy growth. By prioritizing due diligence, participants can reduce risks, encourage transparency, and build a foundation of trust within the continually evolving world of tokenization.


Undertaking due diligence on Launchpad is a vital process for guaranteeing the safety, reliability, and prosperity of tokenization endeavors. By performing comprehensive evaluations of the project, technical framework, legal adherence, team proficiency, and market forces, participants can make well-informed choices while minimizing potential threats. Placing emphasis on due diligence is crucial for cultivating confidence, drawing investments, and encouraging responsible expansion in the thrilling realm of tokenization.

Nextrope Tokenization Launchpad Platform

Nextrope Launchpad Platform is a White Label solution in a Software-as-a-Service model that helps you launch your project within a month and fundraise with Initial Coin Offering (ICO) or Security Token Offering (STO).

Our platform allows you to participate in the broad financial market of digital assets. Expand your reach and find investors globally. Tokenize your project and start raising capital within a month!

If you are looking for a software house that will become your reliable technology partner in the tokenization process, our experts are ready to help you at any stage of it. After years, we simply know the basics of stunning projects. Let our experience become your success. Read more about Nextrope Tokenization Launchpad Platform and Contact Us!

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Applying Game Theory in Token Design

Kajetan Olas

16 Apr 2024
Applying Game Theory in Token Design

Blockchain technology allows for aligning incentives among network participants by rewarding desired behaviors with tokens.
But there is more to it than simply fostering cooperation. Game theory allows for designing incentive-machines that can't be turned-off and resemble artificial life.

Emergent Optimization

Game theory provides a robust framework for analyzing strategic interactions with mathematical models, which is particularly useful in blockchain environments where multiple stakeholders interact within a set of predefined rules. By applying this framework to token systems, developers can design systems that influence the emergent behaviors of network participants. This ensures the stability and effectiveness of the ecosystem.

Bonding Curves

Bonding curves are tool used in token design to manage the relationship between price and token supply predictably. Essentially, a bonding curve is a mathematical curve that defines the price of a token based on its supply. The more tokens that are bought, the higher the price climbs, and vice versa. This model incentivizes early adoption and can help stabilize a token’s economy over time.

For example, a bonding curve could be designed to slow down price increases after certain milestones are reached, thus preventing speculative bubbles and encouraging steadier, more organic growth.

The Case of Bitcoin

Bitcoin’s design incorporates game theory, most notably through its consensus mechanism of proof-of-work (PoW). Its reward function optimizes for security (hashrate) by optimizing for maximum electricity usage. Therefore, optimizing for its legitimate goal of being secure also inadvertently optimizes for corrupting natural environment. Another emergent outcome of PoW is the creation of mining pools, that increase centralization.

The Paperclip Maximizer and the dangers of blockchain economy

What’s the connection between AI from the story and decentralized economies? Blockchain-based incentive systems also can’t be turned off. This means that if we design an incentive system that optimizes towards a wrong objective, we might be unable to change it. Bitcoin critics argue that the PoW consensus mechanism optimizes toward destroying planet Earth.

Layer 2 Solutions

Layer 2 solutions are built on the understanding that the security provided by this core kernel of certainty can be used as an anchor. This anchor then supports additional economic mechanisms that operate off the blockchain, extending the utility of public blockchains like Ethereum. These mechanisms include state channels, sidechains, or plasma, each offering a way to conduct transactions off-chain while still being able to refer back to the anchored security of the main chain if necessary.

Conceptual Example of State Channels

State channels allow participants to perform numerous transactions off-chain, with the blockchain serving as a backstop in case of disputes or malfeasance.

Consider two players, Alice and Bob, who want to play a game of tic-tac-toe with stakes in Ethereum. The naive approach would be to interact directly with a smart contract for every move, which would be slow and costly. Instead, they can use a state channel for their game.

  1. Opening the Channel: They start by deploying a "Judge" smart contract on Ethereum, which holds the 1 ETH wager. The contract knows the rules of the game and the identities of the players.
  2. Playing the Game: Alice and Bob play the game off-chain by signing each move as transactions, which are exchanged directly between them but not broadcast to the blockchain. Each transaction includes a nonce to ensure moves are kept in order.
  3. Closing the Channel: When the game ends, the final state (i.e., the sequence of moves) is sent to the Judge contract, which pays out the wager to the winner after confirming both parties agree on the outcome.

A threat stronger than the execution

If Bob tries to cheat by submitting an old state where he was winning, Alice can challenge this during a dispute period by submitting a newer signed state. The Judge contract can verify the authenticity and order of these states due to the nonces, ensuring the integrity of the game. Thus, the mere threat of execution (submitting the state to the blockchain and having the fraud exposed) secures the off-chain interactions.

Game Theory in Practice

Understanding the application of game theory within blockchain and token ecosystems requires a structured approach to analyzing how stakeholders interact, defining possible actions they can take, and understanding the causal relationships within the system. This structured analysis helps in creating effective strategies that ensure the system operates as intended.

Stakeholder Analysis

Identifying Stakeholders

The first step in applying game theory effectively is identifying all relevant stakeholders within the ecosystem. This includes direct participants such as users, miners, and developers but also external entities like regulators, potential attackers, and partner organizations. Understanding who the stakeholders are and what their interests and capabilities are is crucial for predicting how they might interact within the system.

Stakeholders in blockchain development for systems engineering

Assessing Incentives and Capabilities

Each stakeholder has different motivations and resources at their disposal. For instance, miners are motivated by block rewards and transaction fees, while users seek fast, secure, and cheap transactions. Clearly defining these incentives helps in predicting how changes to the system’s rules and parameters might influence their behaviors.

Defining Action Space

Possible Actions

The action space encompasses all possible decisions or strategies stakeholders can employ in response to the ecosystem's dynamics. For example, a miner might choose to increase computational power, a user might decide to hold or sell tokens, and a developer might propose changes to the protocol.

Artonomus, Github

Constraints and Opportunities

Understanding the constraints (such as economic costs, technological limitations, and regulatory frameworks) and opportunities (such as new technological advancements or changes in market demand) within which these actions take place is vital. This helps in modeling potential strategies stakeholders might adopt.

Artonomus, Github

Causal Relationships Diagram

Mapping Interactions

Creating a diagram that represents the causal relationships between different actions and outcomes within the ecosystem can illuminate how complex interactions unfold. This diagram helps in identifying which variables influence others and how they do so, making it easier to predict the outcomes of certain actions.

Artonomus, Github

Analyzing Impact

By examining the causal relationships, developers and system designers can identify critical leverage points where small changes could have significant impacts. This analysis is crucial for enhancing system stability and ensuring its efficiency.

Feedback Loops

Understanding feedback loops within a blockchain ecosystem is critical as they can significantly amplify or mitigate the effects of changes within the system. These loops can reinforce or counteract trends, leading to rapid growth or decline.

Reinforcing Loops

Reinforcing loops are feedback mechanisms that amplify the effects of a trend or action. For example, increased adoption of a blockchain platform can lead to more developers creating applications on it, which in turn leads to further adoption. This positive feedback loop can drive rapid growth and success.

Death Spiral

Conversely, a death spiral is a type of reinforcing loop that leads to negative outcomes. An example might be the increasing cost of transaction fees leading to decreased usage of the blockchain, which reduces the incentive for miners to secure the network, further decreasing system performance and user adoption. Identifying potential death spirals early is crucial for maintaining the ecosystem's health.

The Death Spiral: How Terra's Algorithmic Stablecoin Came Crashing Down
the-death-spiral-how-terras-algorithmic-stablecoin-came-crashing-down/, Forbes


The fundamental advantage of token-based systems is being able to reward desired behavior. To capitalize on that possibility, token engineers put careful attention into optimization and designing incentives for long-term growth.


  1. What does game theory contribute to blockchain token design?
    • Game theory optimizes blockchain ecosystems by structuring incentives that reward desired behavior.
  2. How do bonding curves apply game theory to improve token economics?
    • Bonding curves set token pricing that adjusts with supply changes, strategically incentivizing early purchases and penalizing speculation.
  3. What benefits do Layer 2 solutions provide in the context of game theory?
    • Layer 2 solutions leverage game theory, by creating systems where the threat of reporting fraudulent behavior ensures honest participation.

Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.


Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics


The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.


What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.