Curator Disclosure and Vault Supplemental Terms

1. APPLICATION AND STATUS OF THIS SCHEDULE

1.1 This Schedule 2 forms part of, and is incorporated by reference into, the BNQ Terms and Conditions (the “Terms”). Capitalised terms used but not defined in this Schedule have the meanings given in the Terms.

1.2 This Schedule applies to your access to and use of any Vault and to any Market in respect of which a Curator is appointed. In the event of any inconsistency between this Schedule and the body of the Terms in respect of a Vault, this Schedule prevails.

1.3 As at the Effective Date, the Protocol operates as a permissioned lending market based on an unmodified Aave v3 deployment. This Schedule is issued so that Users are informed of the intended architecture and of the role and limitations of the Curator. No Vault is available, and no Vault may be deposited into, unless and until its deployment is announced on the Interface. Until that announcement, clauses 2 to 10 of this Schedule are descriptive of intended architecture only and confer no rights and impose no obligations. The Interface will carry the same statement, in the same terms, until the first Vault is deployed. The deployment of any Vault, its parameters and its fee arrangements are subject to change.

2. VAULT ARCHITECTURE

2.1 A Vault is a smart contract which accepts deposits of a single loan asset from Users, issues the depositor a transferable or non-transferable share position representing a pro-rata claim on the Vault’s assets, and allocates the deposited assets across one or more underlying Markets in accordance with parameters configured by the Curator.

2.2 The Operator does not intend, and does not structure, any Vault to constitute a fund, a collective investment scheme, a managed account, a trust or a pooled investment vehicle, or to cause Vault shares to constitute units, securities or interests in a legal entity. This is a statement of the Operator’s intention and design and is not a legal determination binding on any regulator or court. The characterisation of a Vault or of Vault shares under the law of your own jurisdiction is a matter you must determine for yourself, if necessary with independent legal advice (see clause 16 of Schedule 1). Vault shares confer no ownership, governance, voting or profit-participation right in the Operator or any other person, and represent only a claim against the Vault smart contract determined algorithmically by that contract’s code.

2.3 The value of a Vault share is determined by the smart contract by reference to the Vault’s holdings in the underlying Markets. It may fall as well as rise, including to zero.

3. ROLES

3.1 The following roles may be configured in respect of a Vault. One person may hold more than one role.

1. Owner — holds ultimate control of the Vault contract, including the power to appoint and remove the Curator, Allocator and Sentinel, to set the performance fee and fee recipient, and to set or amend the timelock.
2. Curator — defines the risk configuration of the Vault, including the underlying Markets in which the Vault may be invested, the maximum exposure (supply cap) to each such Market, the Oracles relied upon, and the risk parameters of any Market it curates.
3. Allocator — allocates and reallocates the Vault’s assets between the Markets permitted by the Curator, and sets the order in which liquidity is supplied and withdrawn.
4. Sentinel (or Guardian) — may veto or revoke pending parameter changes, and may reduce exposure or effect emergency de-risking.

3.2 The Operator may act as Owner, Curator and/or Allocator in respect of each Vault made available through the Interface. The Operator may appoint, replace or remove any third party in any such role at any time, without notice to you and without your consent. A change of Curator may materially change the risk profile of a Vault.

3.3 The Curator of each Vault, and the addresses holding each role, will be disclosed on the Interface. You are responsible for satisfying yourself as to the competence and suitability of the Curator before depositing.

4. NATURE AND LIMITS OF THE CURATOR ROLE — CRITICAL DISCLOSURE

4.1 A Curator performs a technical configuration function in respect of smart contract parameters. The Curator:

1. does not act as your agent, trustee, fiduciary, portfolio manager, investment manager, investment adviser, custodian, broker or intermediary;
2. does not take custody, possession or control of your Digital Assets at any time;
3. does not exercise discretion over your property, does not manage your assets, and does not effect transactions on your behalf;
4. does not provide investment advice, personal recommendations, financial planning or suitability assessment; and
5. does not owe you any duty of care, skill, diligence, loyalty, prudence, good faith, best execution or best interests, whether in contract, tort, equity, statute or otherwise, and any such duty is expressly excluded to the maximum extent permitted by law.

4.2 Configuration by a Curator of a Market, Oracle, asset, cap or parameter is not an endorsement, approval, recommendation, verification, audit, certification or warranty of the safety, quality, suitability, solvency, liquidity, legality or value of that Market, Oracle, asset or parameter.

4.3 The Curator’s assessment of risk is subjective, is based on information available at the relevant time, may be wrong, and may prove inadequate under market stress. Curation reduces neither the possibility nor the magnitude of loss.

4.4 You make your own independent decision to deposit into a Vault or to use a Market. You are responsible for your own due diligence on the Vault, the Curator, the underlying Markets, the collateral assets and the Oracles.

5. CURATOR DISCRETION AND CHANGES

5.1 The Curator may at any time, in its sole and absolute discretion:

1. add or remove Markets from the Vault’s permitted allocation set;
2. increase, reduce or set to zero the supply cap applicable to any Market;
3. change the Oracle used by any Market it curates;
4. change LTV, Liquidation Threshold, Liquidation Penalty, reserve factor, borrow cap or interest-rate parameters in any Market it curates;
5. reallocate the Vault’s assets between permitted Markets;
6. introduce, vary or remove fees in accordance with clause 7; or
7. wind-down, pause or discontinue the Vault.

5.2 Certain changes may be subject to a timelock configured in the Vault contract, during which a Sentinel may revoke the pending change and Users may withdraw. Other changes, including reductions of exposure, de-risking and reallocation within the existing permitted set, may take effect immediately and without notice. The applicable timelock period (if any) for each Vault will be disclosed on the Interface. You should not assume that you will have an opportunity to exit before any adverse change takes effect.

5.3 Any change made by a Curator may materially and adversely affect the value of your position, your yield, your ability to withdraw, and your exposure to bad debt.

6. CONFLICTS OF INTEREST — DISCLOSURE

6.1 You are expressly notified of, and by using a Vault or curated Market you consent to, the following conflicts of interest:

1. Operator as Curator. The Operator may act both as the operator of the Interface and as Curator. The Operator sets the risk parameters of Markets from which it derives protocol revenue (including reserve factors and liquidation protocol fees) and may in future derive Curator fees. Higher risk settings may increase utilisation, activity and revenue while increasing the risk borne by Users.
2. Fee-driven allocation. Where a Curator’s remuneration is calculated by reference to yield, assets under curation or utilisation, the Curator has an economic incentive to increase those metrics.
3. Multiple roles. The Operator may act as Owner, Curator, Allocator and Sentinel simultaneously.
4. Own-account positions. The Operator, its affiliates and personnel may themselves supply to, borrow from, or hold positions in the Protocol, Vaults or the underlying assets. They are under no obligation to disclose, refrain from or account to you for any such position or gain.
5. Liquidation operators. The Operator or its affiliates may operate, appoint or be economically interested in the permissioned liquidation service, which receives a share of Liquidation penalties paid by Borrowers.
6. Third-party relationships. The Operator may receive fees, incentives, grants, token allocations or other benefits from asset issuers, Oracle providers, blockchain foundations or other third parties whose assets or services are listed, selected or integrated.

6.2 The Operator maintains no obligation to you to avoid, mitigate or manage any conflict described in clause 6.1, and the disclosure in this clause 6 is given in place of, and not in addition to, any duty which might otherwise arise.

7. FEES

7.1 As at the Effective Date, no Curator fee, performance fee or management fee is charged. Protocol-level fees are as set out in clause 11 (Fees) of the Terms.

7.2 The Owner or Curator reserves the right to introduce a performance fee and/or a management fee in respect of any Vault or curated Market. A performance fee would be calculated as a percentage of the yield or interest generated by the relevant Vault or Market and accrued to the designated fee recipient.

7.3 Before any such fee first takes effect in respect of a Vault or Market, the Operator will publish on the Interface: (a) the nature of the fee; (b) the rate; (c) the basis of calculation and accrual; (d) the fee recipient; and (e) the date from which it applies. Where the Vault contract provides for a timelock in respect of fee changes, that timelock will apply.

7.4 Your continued participation in the relevant Vault or Market after the effective date of a fee constitutes your acceptance of it. If you do not accept a fee, your remedy is to withdraw, subject to available liquidity.

7.5 Fees may reduce, and in adverse conditions may eliminate, the return on your position. Fees are charged regardless of whether your position is in profit.

8. NO GUARANTEE OF PERFORMANCE

8.1 No representation, warranty or undertaking is given by any Protected Person as to the performance, yield, return, capital preservation, liquidity, risk level, volatility or continued availability of any Vault or Market.

8.2 Any target, projected, historic, simulated or indicative return, APY or risk rating displayed on the Interface or in the Documentation is illustrative only, is subject to change without notice, may be inaccurate, is not a promise or forecast, and must not be relied upon. Past performance is not indicative of future results.

8.3 A Vault’s exposure to any Market means that a failure of that Market, including bad debt, an exploit, an Oracle failure or a collateral collapse, will be borne by depositors in that Vault. Diversification across Markets does not eliminate the risk of total loss and may increase the number of points of failure to which you are exposed.

9. WITHDRAWALS FROM VAULTS

9.1 Your ability to withdraw from a Vault depends on the liquidity available in the underlying Markets to which the Vault is allocated. Where those Markets are highly utilised, withdrawal may be delayed, partial or unavailable.

9.2 Withdrawal may also be prevented by a Market halt (including a “fail-closed” Oracle halt), a pause imposed by the Protocol Administrator, or a Vault wind-down.

9.3 No Protected Person guarantees that any withdrawal will be available at any time, and no Protected Person is liable for any loss arising from delay or inability to withdraw.

10. THIRD-PARTY CURATORS

10.1 Where a Vault or Market is curated by a person other than the Operator:

1. that third-party Curator acts on its own account and not as agent of the Operator;
2. the Operator does not vet, verify, supervise, monitor, endorse or accept responsibility for the third-party Curator, its personnel, its risk methodology, its parameters or its decisions;
3. the Operator is not liable for any act, omission, default, negligence, fraud or insolvency of any third-party Curator; and
4. any claim you may have arising from curation lies against that third-party Curator alone, and you release each Protected Person from any such claim.

10.2 The Operator may, but is not obliged to, publish information regarding third-party Curators. Any such information is provided for convenience only, is not verified by the Operator, and must not be relied upon.

11. LIABILITY

11.1 The disclaimers, exclusions, limitations of liability (including the aggregate cap in clause 19.2 of the Terms), indemnity, governing law, exclusive jurisdiction and class-action waiver provisions of the Terms apply in full to this Schedule and to all Curator, Allocator, Sentinel, Owner and Vault activity, and each Curator, Allocator, Sentinel and Owner is a Protected Person for those purposes.

11.2 To the maximum extent permitted by law, no Protected Person shall have any liability to you arising out of or in connection with any curation decision, parameter setting, allocation, reallocation, listing, de-listing, Oracle selection, cap, fee, timelock, veto, wind-down, or any failure or delay to take any such action.

12. ACKNOWLEDGEMENT

12.1 By depositing into a Vault or using a curated Market you acknowledge and agree that:

1. you have read and understood this Schedule and the Risk Disclosure Statement at Schedule 1;
2. you understand the role and the limits of the Curator, and that the Curator owes you no duty and manages nothing on your behalf;
3. you have been given, and you accept, the conflicts of interest disclosed in clause 6;
4. you make your own independent decision and conduct your own due diligence; and
5. you may lose all Digital Assets deposited in a Vault.