Overview

This note details how Clearstar conducts Blockchain Due Diligence on yield opportunities. It is a part of the Capital Allocation Framework and covers the assessment of the underlying blockchain(s) on which the opportunity operates: their decentralisation, reliability, maturity, security model, and cross-chain infrastructure.

This stage is human-led. Analysts conduct the research directly, with assistance from VALIS submodules where relevant (e.g. on-chain data retrieval, validator set analysis). The full VALIS pipeline does not run for Specific DD; it is reserved for General Due Diligence . Findings from VALIS's General DD report may, however, provide useful context and starting points for the analyst's work here.

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Blockchain risk is foundational Even a perfectly designed protocol with a flawless asset can be compromised if the underlying blockchain suffers extended downtime, validator collusion, or a consensus failure. Blockchain risks affect everything built on top of it, and severe issues here can disqualify an opportunity regardless of how well the other tracks perform.

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Escalation If the analyst identifies a critical finding during Blockchain DD (e.g. evidence of validator collusion, unreported chain halts, or a bridge exploit in progress), the analyst escalates immediately to the senior analyst. The senior analyst determines whether to pause all Specific DD tracks, request additional data, or flag the finding for Improvements & Engagement.

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flowchart TD
    A[Opportunity enters Blockchain DD] --> B[Analyst assesses 8 areas]
    B --> C[Each area graded A through F]
    C --> D{Any critical finding?}
    D -->|Yes| E[Escalate to senior analyst]
    D -->|No| F[Compile composite score]
    E --> G[Senior analyst determines action]
    F --> H[Blockchain DD report produced]
    H --> I["Feeds into APB Risk Rating (B component)"]

    style A fill:#4A90D9,stroke:#2E6BA6,color:#fff
    style D fill:#E8A838,stroke:#B8862D,color:#fff
    style E fill:#D9534F,stroke:#A94442,color:#fff
    style H fill:#5BB85B,stroke:#3D8B3D,color:#fff
    style I fill:#5BB85B,stroke:#3D8B3D,color:#fff

Assessment Areas

Blockchain Due Diligence covers eight areas. Each area receives a letter grade (A through F), consistent with the rating scale used in General Due Diligence.

1. Decentralisation and Validator Set

This area examines how decentralised the blockchain is in practice, focusing on the validator (or miner/sequencer) set and the distribution of power within it.

Key questions addressed: