Optimal vesting and auditing with false positives

Characterize the optimal vesting horizon and audit rate for NFT-based reward mechanisms when auditing can falsely reject genuine claims, subject to both the modified genuine-participation constraint and the fraud-deterrence condition.

Background

The baseline model assumes that genuine claims always pass verification. The extension allows an audited genuine claim to be rejected with probability η, so genuine participation is governed by the modified constraint q_G^T(1-aη)^T R ≥ k_G. Auditing therefore has a direct cost for genuine participants in addition to its issuer-side capacity cost.

The paper provides the modified participation constraint but does not re-solve the issuer’s optimization problem for the joint choice of vesting horizon and audit rate. The unresolved analysis concerns how false positives alter the optimal deterrence frontier and the balance between delayed vesting and verification.