How Does the Smart Contract Audit Process Mitigate Valuation Risk?

The smart contract audit process mitigates valuation risk by identifying and fixing security vulnerabilities (bugs, exploits) in the protocol's code. A successful audit increases investor confidence, reducing the risk of a catastrophic loss of locked assets (TVL).

This reduced risk translates to a lower risk premium in the DCF model and a higher overall intrinsic value, as the probability of the protocol's long-term survival increases.