Risk Factors and Mitigation

Synthetic Stability Risks:

• Depeg risk: Mitigated through over-collateralization (150% minimum) and automated liquidations via Uniswap V4

• Oracle manipulation: Multi-source price feeds (Pyth, Chainlink/API3 & proprietary) with circuit breakers

• RWA defaults: Diversified portfolio across 50+ receivables, insurance buffer fund (2% of TVL)

• Yield distribution risk: Isolated smart contracts ensure base yields even if optimization layer fails

Regulatory Risks:

• Securities classification: Synthetics are collateral receipts, not investment contracts

• Cross-border restrictions: Compliant KYC for institutional vaults while maintaining permissionless retail access

• RWA custody: Licensed partners (Liqi) handle securities custody; we only interact with tokens

Technical Risks:

• Smart contract bugs: Multi-audit strategy + bug bounties

• Composability breaks: Capped wrapped versions (wcmBTC) ensure sustainable DeFi compatibility

• Liquidation cascades: Isolated vault architecture prevents contagion

Currency Risk Elimination (cmUSD):

• USD-denominated receivables eliminate FX exposure

• Counterparties are Brazilian companies with USD revenues

• Natural hedge through business model alignment

• No need for expensive derivative hedging services

Institutional Risk Parameters (cmBTC):

• Higher collateralization ratios for institutions (200% vs 150%)

• Dedicated liquidation pools to prevent cascades

• Automated rebalancing for large positions

Unified Pool Risk Isolation:

• Each asset vault maintains independent solvency

• Optimization layer can be paused without affecting base yields

• Emergency withdrawal preserves principal + base yield

• Circuit breakers prevent excessive redistribution