Pre-TGE Token & Financial Metrics Audit

8 min readSep 11, 2024

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This article produced by Nomiks, Web 3.0 firm specialised in Token Economics Design and monitoring, deals with a pre-TGE audit.
It is a part of a previous article on a global (called holistic) Audit Framework taking into account all the phases of a project that you can read also here.

Launching a token in the Web3 space is challenging, especially for startups with limited information, resources, and expertise. Founders often struggle to design a tokenomics model that aligns with project goals and meets market expectations. Without proper benchmarks or understanding best practices, these projects risk creating token models that lead to inflation, weak user incentives, and loss of investor confidence.

Nomiks Token and Financial Metrics Audit bridges these gaps by providing a comprehensive review before the Token Generation Event (TGE). We leverage industry benchmarks and data-driven insights to refine tokenomics. Our audit focuses on identifying potential issues early in the process, optimizing token pricing across fundraising stages, refining fully diluted valuation (FDV) and return on investment (ROI), or even structuring vesting schedules to control inflation and enhance user engagement and growth.

This approach mitigates risks, enhances market positioning, and strengthens investor confidence, ensuring that even with limited budgets, projects can build a solid foundation for growth and long-term success.

Our pre-TGE token metrics and financial metrics audit provides a robust foundation for launching a successful and sustainable tokenomics model.
Focusing on data analysis, strategic alignment, and economic optimization helps projects enhance market position, attract investors, and build loyalty.

Why Choose Nomiks pre-TGE Audit?

Speed and Efficiency: Our rapid 72-hour audit ensures timely identification of potential issues, safeguarding against missed investment opportunities and optimizing pre-TGE preparations.
Data-Driven Approach: Utilizing Nomiks’ internal databases and advanced data mining techniques, we provide benchmarks and insights tailored to specific market sectors, enhancing the accuracy and reliability of our recommendations.
Algorithm Optimization: Our proprietary algorithms leverage internal database insights to fine-tune critical parameters, such as token price, fully diluted valuation (FDV), and return on investment (ROI) across fundraising rounds. They also optimize vesting schedules to minimize inflation over time and align reward emissions with user adoption strategies.
Strategic Insights: Our audit goes beyond compliance, providing strategic guidance on token supply, allocation, and issuance that supports long-term project success.

Phases

Phase 0 — Data Analysis and Initial Research: Before initiating the audit, we perform a comprehensive analysis of both internal and public data related to the audited company. This process is enhanced by Nomiks’ proprietary data and relevant industry benchmarks.
During this phase, we study market size, growth potential, and the competitive landscape to evaluate the project’s market position and potential share. We also compare the project’s data with established industry standards, assessing its agent dynamics and economic model against various benchmarks.
Examples of sectors and categories used for this analysis include the Open Digital Economy (e.g., content creation, game metaverse), Payment, Two-sided Markets (e.g., collectibles/NFTs, identity, reputation), Infrastructure (e.g., blockchain, DEPIN, RWA, oracle), Financial services (e.g., DeFi, centralized exchanges), etc.
To know more about our classification : see our article on this subject
Phase 1 — Token Metrics & Financial Audit: Our audit evaluates critical elements of the tokenomics model, ensuring alignment with the project’s economic goals and long-term sustainability. The audit includes:
• Supply Distribution: Reviewing the total token issuance size, lock-up ratios, and distribution strategy to meet communication and investor expectations.
• Economic Constants: Defining targets for token circulation, velocity, and hold ratio to optimize the economic framework.
• Allocation and Funding: Assessing token fair value, funding strategies, and allocation among various stakeholders to ensure a balanced and sustainable economic model.
• Rewards Emission and Optimization: Designing token allocation strategies that balance initial attraction with long-term sustainability, fostering a committed community.
See our article on this subject.
• Vesting Schedules and Strategy: Developing vesting schedules that align with the supply issuance and economic goals to minimize inflation risk and maintain stability.
See our article on this subject.
Phase 2: Deliverables
• Comprehensive Audit Report: A detailed PDF report documenting the findings from the data analysis, financial and token metrics, and recommendations.
Download a template of such a report.
• Final Recommendations: Actionable insights and strategic recommendations for improving token metrics and economic resilience.

Detailed Steps of the Audit

Supply Management: We assess the maximum token supply to align with the project’s use case and investor expectations, taking into account factors like decimals, velocity, and friction to ensure practical transaction sizes without leading to excessive fractional transactions or hyperinflation. While some ICO investors may be wary of high token supplies due to possible misinterpretations, it’s important to note that total supply does not inherently determine a token’s value or economic viability. What truly matters is the effectiveness of the token’s economic model.

2. Token Allocation: We evaluate initial token allocation to ensure fair distribution among key stakeholders, including Teams/Founders, Partners, Advisors, Key Opinion Leaders (KOL), Pre-seed and Seed investors, multiple Private rounds, Airdrop campaigns (S1, S2, S3, etc.), Public Sales via single or multiple launchpads (ICO, IDO, IEO), Community Rewards, Liquidity provision for listings, Treasury management, Marketing efforts, etc. Our focus is on ensuring sufficient liquidity for market launch, managing dilution risks, and balancing interests between private and public investors to promote long-term stability and active participation.

3. Funding Structure: Our audit reviews the project’s fundraising strategy by setting total funding targets, defining the number of rounds, and balancing private and public token allocations for strategic alignment and market stability. A central component of this strategy is managing the price differential between private and public sales, incorporating community rewards to incentivize participation. We design public sale structures (e.g., ICO) to ensure pricing reflects fair market value, preventing speculative anomalies. For instance, setting a high public sale price can lead to an elevated listing price, potentially inflating the fully diluted market cap (FDMC/FDV) beyond the project’s actual value, so strategic pricing is essential for maintaining long-term stability.

4. Issuance and Vesting Optimization: We develop tailored issuance schedules and vesting strategies with upfront allocations, lock-up periods, and exit strategies to align with your financial goals and ensure stakeholder commitment. Categorizing vesting into short, medium, and long-term horizons helps manage selling pressure and avoid inflation spikes. However, significant upfront token availability can lead to selling pressure and price impacts post-TGE. To mitigate this, we recommend proactive strategies such as market-making (stabilizing token prices and providing liquidity), OTC Sales (managing token supply through private sales to strategic investors), Buyback Programs (using revenues to purchase tokens and support prices), Marketing Campaigns (boosting demand through targeted promotions), and Liquidity Provision (ensuring adequate liquidity for market makers with stablecoin and token reserves). We also provide Token Engineering and Network Optimization by implementing incentives like staking rewards and governance voting to boost engagement and create demand loops (not part of the Audit).

5. Reward Models: We design reward emission models to drive desired behaviors and long-term engagement, using tailored functions like Sigmoid/S-shape (increasing rewards during growth), Exponential Negative Emission (high initial rewards decreasing to attract early adopters), or Constant Emission (steady rewards). To ensure fairness, we optimize parameters for a low Gini coefficient, balancing early adopter rewards with broad accessibility. We also optimize reward issuance to align with strategic inflection points, like shifting from TGE-based rewards to those funded by real protocol revenues (e.g. transaction fees) to sustain engagement, and/or by aligning reward strategies with anticipated Web3 market surges to maximize immediate and long-term impact.

5. Inflation Management (for inflationary tokens only, e.g. Layer 1): We use dynamic decreasing inflation to maintain economic stability and incentivize participation, aligning token supply with network growth (e.g., via a negative exponential function). This approach gradually reduces token issuance to prevent value dilution, initially rewarding early participants and fostering long-term engagement through network use and transaction fees. Our strategy is competitive with successful approaches used by other leading blockchains, ensuring our token economics remain in line with industry standards and market expectations, thereby maintaining token value and economic stability.

Key Document: Token Metrics Audit Template

To support the pre-TGE audit, Nomiks has developed a Token Metrics Audit Template, available as a pivotal document here. This template is designed to facilitate the collection and analysis of key data required for a thorough evaluation of tokenomics and financial metrics before the Token Generation Event (TGE).

Using this document ensures a comprehensive and standardized approach to project analysis, helping teams align their tokenomics with investor expectations and market best practices.

If you need any help completing this form, please write to contact@nomiks.io

Spreading the word about our fied is a long-term task that we approach with equal enthusiasm and diligence. Here are just a few examples for the reader’s reference:

Pre-TGE Token & Financial Metrics Audit

Why Choose Nomiks pre-TGE Audit?

Phases

Detailed Steps of the Audit

Written by Nomiks