Economic Design Audit

ECONOMIC_DESIGN_AUDIT Skill

Trigger Pattern: MONETARY_PARAMETER flag (required) Inject Into: Breadth agents (merged via M6 hierarchy)

For every monetary parameter setter (rate, rebase, supply, mint, burn, emission, inflation, peg, price cap/floor, fee, reward rate) in the protocol:

1. Parameter Boundary Analysis

For each parameter: substitute min and max into ALL consuming functions. Tag: [BOUNDARY:param=val -> outcome]

2. Economic Invariant Identification

List all economic invariants the protocol must maintain: | Invariant | Parameters Involved | Can Admin Break It? | Functions That Assume It |

For each setter: can changing this parameter break an invariant that user-facing functions depend on? If yes -> finding.

3. Rate/Supply Interaction Matrix

For protocols with multiple monetary parameters that interact: | Parameter A | Parameter B | Interaction | Can A*B Produce Extreme Output? |

Check: can two independently-valid parameter settings combine to create an extreme or invalid economic state? (Rule 14 constraint coherence)

4. Fee Formula Verification at Normal Values

For every fee-related computation (fee calculation, fee deduction, fee distribution):

4a. Concrete Example Computation

Pick 3 representative fee rates (e.g., 1% = 100 BPS, 5% = 500 BPS, 10% = 1000 BPS) and trace through the actual code formula:

Tag: [BOUNDARY:fee_bps={val} → effective_rate={computed_rate}]

Red flags:

• Gross-up formulas: amount * MAX / (MAX - fee) charges effective rate of fee/(MAX-fee), not fee/MAX. At 5% this is 5.26%, not 5%. Document whether this is intentional.
• Fee-on-fee: Does fee A's output feed into fee B's input? If so, the combined effective rate is not simply A + B.
• Rounding direction: Does rounding favor the protocol or the user? For fee deductions, rounding UP (ceiling via mulDivUp or equivalent) favors the protocol.
• Precision loss: With uint256 math at 1e18 scale, do intermediate products overflow or lose precision? Check mulDiv ordering.

4d. Fee-Base Consistency

For every fee computation, trace the base amount (the value the fee is computed on) through ALL subsequent code paths:

Methodology:

• Identify the variable used as fee base (e.g., amount, depositAmount)
• Trace that variable FORWARD from the fee computation to the end of the function
• If the variable is reduced (capped, downscaled, adjusted to remaining capacity, slippage-adjusted) AFTER the fee was computed → the fee was charged on a larger base than what was actually used
• Concrete test: If fee = amount * feeRate / MAX, then amount is reduced to leftover (e.g., remaining allocation), the user paid fee on amount but only leftover was processed - overcharge of fee * (1 - leftover/amount)

4b. Fee Interaction Matrix

For protocols with multiple fee types:

4c. Fee Impact on Share Price

If the protocol uses share-based accounting (ERC4626 vaults, LP tokens):

• After fee deduction: does the share price change?
• Does the fee mechanism create a spread between deposit and immediate withdrawal?
• Is the spread documented and within reasonable bounds?

5. Emission/Inflation Sustainability

For protocols with emission/inflation/rebase mechanics:

• What is the maximum emission rate over 1 day / 1 week / 1 year?
• Can emissions exceed the protocol's capacity to back them?
• Is there a supply cap? Can it be bypassed by parameter changes?

Step Execution Checklist