A Should-Cost Model is an analytical framework used to estimate the theoretical optimal cost of a product, service, or component based on its constituent elements, manufacturing processes, and overheads. In the crypto industry, this model assists in evaluating the true economic value of technology solutions, infrastructure services, or token issuance costs. Its purpose is to ensure fair pricing and optimize procurement strategies.
Mechanism
The mechanism of a Should-Cost Model involves breaking down an offering into its fundamental cost drivers, such as raw materials, labor, overheads, research and development, and profit margins. Data points on industry benchmarks, production efficiencies, and market rates for components are fed into an algorithmic calculation. This generates an independent cost estimate, allowing for negotiation leverage and objective vendor evaluation.
Methodology
Implementing a Should-Cost Model necessitates a rigorous data collection and analytical methodology, combining engineering cost estimation with market intelligence. This approach often involves reverse engineering product costs or analyzing service delivery models to identify potential areas of inefficiency or excessive pricing by suppliers. The strategic objective is to drive value in procurement, particularly for complex crypto infrastructure and software, ensuring that expenditure aligns with justified economic realities.
Pre-trade analytics redefine OTC best execution, transforming the duty from a post-trade justification into a proactive engineering of the optimal outcome.
Single-bidder RFPs create substantial risk by dismantling competitive leverage, requiring a pivot to rigorous, independent validation of price and performance.
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