risk disclosures
Overview
The following risk disclosures accompany the Master Loan Agreement and must be acknowledged by all parties at onboarding. They are adapted from Wildcat Protocol's comprehensive Risk Disclosure Statement for Parthenon Fi's custody-native model.
Smart Contract and Protocol Risks
The Platform relies on smart contracts deployed on Canton Network. While audited, smart contracts may contain undiscovered vulnerabilities including logic errors, unforeseen state transitions, and inherited third-party library flaws.
Canton's Daml-based smart contracts mitigate certain risk categories — no MEV extraction, no front-running due to sub-transaction privacy, no reentrancy due to the authorization model. However, software bugs, flawed business logic, and unforeseen blockchain interactions remain possible.
Users acknowledge that smart contract interaction involves inherent risk of partial or total loss.
Custodian Risk
While custodians are regulated entities (OCC-chartered or ADGM FSRA-licensed), custody of digital assets involves risks including:
Cyberattacks on custodian infrastructure
Key management failures
Regulatory actions affecting custodian operations
Insolvency risk
Custodian insurance coverage (e.g., BitGo's $250M Lloyd's coverage) may not fully offset losses in extreme scenarios. Users should review the custodian's insurance limits, security practices, and regulatory status independently.
Counterparty and Credit Risk
Loans under the MLA involve counterparty credit risk. The borrower may default or refuse to repay. While collateral provides security, market volatility may cause collateral value to decline below outstanding obligations between margin call and liquidation execution.
Liquidation may be delayed by:
Market conditions (thin order books, exchange outages)
Custodian processing times
Network congestion on Canton or settlement networks
Users acknowledge that losses, potentially substantial or total, are possible depending on collateral adequacy and market conditions.
Oracle and Price Feed Risks
LTV monitoring relies on oracle price feeds that may experience:
Inaccuracies in source data
Delays in feed updates
Manipulation of underlying data sources
Complete outages
Multi-source TWAP feeds and dual-oracle architecture mitigate but do not eliminate these risks. Incorrect price data may result in premature or delayed margin calls and liquidations.
Regulatory Risk
The legal landscape for digital asset lending is evolving. Regulatory changes in any jurisdiction may affect:
The legality of participation in lending markets
The enforceability of the GMSLA and MLA
The economics of transactions (new taxes, fees, or capital requirements)
The ability to use certain collateral types
Parties are responsible for their own legal compliance including AML/KYC, sanctions, tax, and securities regulations in all jurisdictions where they operate.
Network and Technology Risks
Canton Network, while designed for enterprise use, may experience:
Network outages or degraded performance
Consensus failures
Upgrades that affect contract behavior
Interoperability issues with custodian systems
The Platform's reliance on external infrastructure (Canton Network, custodian APIs, oracle networks) means that failures in any component can affect the protocol's ability to process transactions, monitor collateral, or execute margin calls and liquidations.
Liquidity Risk
Secondary market liquidity for Loan Position Tokens is not guaranteed. LPT holders may be unable to sell positions at desired prices or at all, particularly for:
Large positions relative to market depth
Positions approaching maturity with deteriorating collateral
Positions in less liquid collateral types
Market-wide stress events
Force Majeure
Events beyond the control of any party — including natural disasters, government actions, wars, pandemics, and systemic infrastructure failures — may prevent or delay the performance of obligations under the MLA.
This disclosure is for informational purposes. It does not constitute legal, financial, or investment advice. All participants should seek independent professional advice before engaging in lending activities on Parthenon Fi.