Alpha In The Audits

The Blockchain Sector 2023-10-13

James Bachini

Oct 13

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The concept of alpha draws up connotations of secret trading signals that magically predict the future and tell us when to buy or sell Bitcoin. Alpha can be anything that gives us an advantage over the market and can often be found in the most unsuspecting places.

In the past 4 years, my somewhat ugly calculations, suggest there has a been a significant correlation between new crypto project’s ROI and the budget allocated towards security.

There is now a section at the bottom of the newsletter rounding up recent News, Articles & Speculation

Given the transparent nature of the crypto industry, most external auditing firms make their findings public. This includes reports regarding new projects for which security reviews have been conducted. These reports essentially provide investors a sneak peak at new projects or those in development of new features.

The ability and willingness to pay for excruciatingly expensive auditing services is a strong signal for founders long term ambitions and ability to raise capital.

I’m not suggesting blindly aping every project that gets a security audit, but to use the latest reports as one of many feeders for emerging protocols and further investment research.

SpearbitDAO Github Repo - One of the top auditors discussed here

Often, these projects may not be live or have a token ready for investment. Monitoring their developments via social media or newsletters may provide timely updates on private or public sales.

Bug bounty companies like Code4rena and ImmuneFi offer a list of projects with more immediate opportunities, as they are usually live in production.

It’s also possible to create a list of auditors within Twitter to review announcements. This is something I’ve been working on this week after discovering Twitter had an amazing advanced search feature that I never knew existed: https://jamesbachini.com/smart-money-list/

Going through a list of recently audited projects once a month can be one method of highlighting projects that are taking security seriously, expecting users and creating production ready code.

There is alpha in the audits