DATABASE//EXECUTIVE-STRATEGY//VENDOR DUE DILIGENCE: EVALUATING WEB3 PARTNERS
Module Execution // EXECUTIVE STRATEGY / PROCUREMENT

Vendor Due Diligence: Evaluating Web3 Partners

REF_ID: LSSN_VENDOR-D
LAST_AUDIT: January 6, 2026
EST_TIME: 13 Minutes
REFERENCE_NOTE

The Executive Verdict

What to look for in a Web3 software vendor? The primary metric for evaluating a Web3 vendor is the "Trustless Test." You must determine if the vendor is acting as a Software Provider or a Custodian. • Pass (Non-Custodial): The vendor provides software (e.g., wallet interface), but you retain the private keys. If the vendor goes bankrupt, your assets are safe on the blockchain. • Fail/High Risk (Custodial): The vendor requires you to deposit funds into their wallet. If they go bankrupt, your assets are likely lost (unsecured creditor status). The Golden Rule: Always prefer non-custodial infrastructure where the vendor has zero access to move your funds.
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Introduction: The "Counterparty" Crisis

In Web2, vendor risk is Data. In Web3, it is Solvency. The failures of FTX and Celsius were not technology failures; they were Vendor failures. As a business leader, you must scrutinize Web3 vendors more than your bank.

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1. The Core Filter: The "Trustless Test"

Ask: "Can you move my money without my permission?"

VISUAL_RECON

A traffic light system. Green = Non-Custodial (SaaS). Yellow = Qualified Custodian (Trust Co). Red = Commingled/Black Box (Yield Platform).

Architectural Wireframe // CW-V-001
ID_01Zone 1: Non-Custodial (Safe). Model: SaaS. Risk: Tech failure, not theft.
ID_02Zone 2: Qualified Custodian (Acceptable). Model: Regulated Trust. Risk: Operational delay.
ID_03Zone 3: Commingled (DANGER). Model: Logic Box. Risk: Total Loss.

Strategic Directive: If a vendor falls into Zone 3, do not hire them.

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2. Technical Diligence: Audit or Die

ID_01Audit History: Must be Tier 1 (Trail of Bits, OpenZeppelin). Recent scope?
ID_02Bug Bounty: Do they pay hackers via Immunefi?
ID_03Key Management: MPC (Multi-Party Computation) is the standard. HSMs are acceptable. Cloud database storage is a failure.
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3. Operational & Legal Diligence

Stop Reading, Start Building

Theory is dangerous without execution.

How to build a Web3 Pitch Deck & Tokenomics ROI. Watch the step-by-step video guide in the The Strategy Course ($39).

ID_01Jurisdiction: Green Flags: USA, UK, Singapore, UAE. Red Flags: Seychelles, "Decentralized HQ".
ID_02SOC 2 Type II: Non-negotiable for B2B software.
ID_03Insurance: Does it cover "Specie" (theft)? Read the fine print on "Hot Wallet" coverage.
ID_04Proof of Reserves: If custodial, demand Merkle Tree Verification of liabilities.
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4. The "Black Box" Red Flags

Disqualifiers: "Proprietary Trading Bot" (Gambling), "Guaranteed Yield" (Ponzi), "Quiet Mode" (Regulatory Evasion), "DAO Managed" (No Liability).

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5. The Exit Strategy: Vendor Lock-In

Can you fire them? Check for Data Portability (CSV exports) and Key Portability (Reconstruct key shards). If you cannot export your keys, you do own your money.

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6. The RFP Checklist

ID_01Provide last 2 Smart Contract Audit reports.
ID_02Link to active Bug Bounty program.
ID_03Confirm SOC 2 Type II status.
ID_04Confirm Architecture (Non-Custodial vs Custodial).
ID_05Legal Entity Name and Jurisdiction.
ID_06Proof of Reserves attestation (if custodial).
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Conclusion: Paranoia is a Virtue

Optimism is for the roadmap; paranoia is for the contract. Your job is to find the vendor that will still be there in 5 years. Boring is safe.

F.A.Q // Logical Clarification

Can I use a hardware wallet (Ledger) for business?

"For sole proprietorships, yes. For companies, No. It's single-user. Use an Enterprise MPC wallet."

What is Smart Contract Risk vs Vendor Risk?

"Smart Contract Risk is code failure. Vendor Risk is bankruptcy. Non-custodial minimizes Vendor Risk."

Are decentralized protocols vendors?

"Technically no, but treat them with equal diligence. Who audited the code? Who holds admin keys?"

Should I pay in crypto?

"Acceptable (USDC), but ensure you get a proper tax invoice."

Official Training Material

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Module ActionsCW-MA-2026

Institutional Context

"This module has been cross-referenced with Executive Strategy / Procurement standards for maximum operational reliability."

VECTOR: EXECUTIVE-STRATEGY
STATUS: DEPLOYED
REVISION: 1.0.4