Reader objective
Build a repeatable pre-approval and monitoring process.
1. Define the position
- Name the exact token, contract, chain, protocol, market, and strategy.
- State the economic exposure and source of expected return.
- Identify the legal claim, issuer, counterparty, or lack of one.
- Record eligible investor and jurisdiction restrictions.
2. Map the dependency stack
- Asset issuer, collateral, redemption, and freeze authority
- Protocol contracts, upgrades, pauses, governance, and audits
- Oracles, bridges, curators, keepers, relayers, and front ends
- Chain liveness, transaction ordering, validators, and upgrade control
- Wallet, custodian, signer, recovery, and transaction-approval workflow
3. Test loss and exit
- Historical exploits, bad debt, depegs, halts, and governance failures
- Observable liquidity at client size—not only TVL
- Redemption gates, queues, market depth, fees, and settlement delay
- Failure scenarios for oracle, bridge, collateral, issuer, and keys
- Expected recovery path and responsible party
4. Make the decision monitorable
- Written verdict and reasons
- Position or sleeve limit
- Observable kill criteria set before investment
- Named owner, next review date, and evidence archive
- Client-language risk statement and suitability rationale
- Version history for corrections and changed decisions
Evidence standardIf a fact can revoke the recommendation, record its source and monitoring method when the position is approved.
Primary and reference sources
- Investment Management — Investment Advisers — U.S. Securities and Exchange Commission
- Crypto Assets — FINRA