Agency Theory in Procurement examines contractual relationships where a principal, such as an institutional crypto investor, delegates authority to an agent, like a crypto exchange or liquidity provider, for sourcing digital assets or execution services. This framework addresses potential conflicts of interest and information asymmetries between parties. Within crypto RFQ or institutional options trading, it highlights how an agent’s self-interest might diverge from the principal’s objective of optimal value or risk management.
Mechanism
The theory’s operational logic identifies agency costs arising from monitoring the agent, bonding mechanisms by the agent, and residual loss from misaligned incentives. In crypto systems, this involves assessing the transparency of agent operations, such as trade execution details on-chain, and the structure of fees or commissions. Smart contract terms can specify performance metrics and automate incentive payouts, reducing reliance on opaque intermediaries and enhancing accountability through verifiable execution.
Methodology
Mitigating agency issues in crypto procurement necessitates robust system design for incentive alignment and verifiable transparency. This involves establishing clear RFQ specifications, implementing on-chain or cryptographically verifiable performance audits, and designing compensation structures that reward goal congruence. Employing decentralized autonomous organizations (DAOs) for collective oversight or utilizing oracle networks for impartial data feeds can further reduce information asymmetry and enforce agent adherence to agreed-upon parameters.
An effective RFP is a system engineered to compel clarity by decomposing needs into verifiable requirements and using a transparent, weighted evaluation framework.
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