IMPORTANT NOTICE
This Risk Disclosure Statement forms part of, and is incorporated by reference into, the BNQ Terms and Conditions (the “Terms”). Capitalised terms used but not defined in this Statement have the meanings given in the Terms.
This Statement does not describe every risk. It is not a substitute for your own due diligence or for independent professional advice. You should not use the Services unless you fully understand the risks described below and are able to bear the total loss of all Digital Assets you commit.
BY ACCESSING OR USING THE SERVICES YOU CONFIRM THAT YOU HAVE READ AND UNDERSTOOD THIS STATEMENT AND THAT YOU ACCEPT EACH OF THE RISKS DESCRIBED IN IT VOLUNTARILY AND ENTIRELY AT YOUR OWN RISK.
1. YOU MAY LOSE EVERYTHING
1.1 Digital Assets are highly volatile, speculative and may become worthless. There is no guarantee of return of capital, of interest, of yield, or of the ability to withdraw.
1.2 The Protocol is experimental technology operating in an immature and rapidly changing market. Loss of some or all of your Digital Assets is a realistic outcome, not a remote possibility.
1.3 There is no deposit guarantee scheme, investor compensation scheme, insurance, guarantee fund or lender of last resort of any kind applicable to the Protocol. If your Digital Assets are lost, no person will compensate you.
2. SMART CONTRACT AND CODE RISK
2.1 The Protocol consists of smart contracts. Smart contracts may contain bugs, logic errors, vulnerabilities or unintended behaviours which may be exploited, resulting in partial or total loss of Digital Assets held in the Protocol.
2.2 The Protocol incorporates the unmodified Aave v3 codebase, which has been the subject of a number of published third-party audits. An independent third-party security audit of the smart contract code has also been completed, and relevant information regarding the audit will be shared in due course.
2.3 An audit, where obtained, is a point-in-time review of a specific version of code. It is not a warranty, guarantee or certification of security, correctness, legality or fitness for purpose.
2.4 Smart contracts may be upgraded, replaced, migrated or paused. Upgrades may introduce new defects or change the economics of your position.
2.5 Transactions on blockchain networks are generally irreversible. An error by you, including an incorrect address, incorrect network, incorrect asset, incorrect amount or an unintended token approval, may result in permanent, unrecoverable loss.
3. LIQUIDATION RISK
3.1 Borrowing on the Protocol is over-collateralised. If the value of your Collateral falls, or the value of your borrowings rises, or accrued interest increases your debt, your Health Factor may fall below the applicable Liquidation Threshold and your position may be liquidated.
3.2 On Liquidation, a Liquidation Penalty is applied and deducted from your Collateral, in addition to the amount required to repay your debt, and part or all of your position may be liquidated. The applicable Liquidation Penalty, close factor and Health Factor thresholds are configured in the Protocol smart contracts and are set out or referenced in the parameters and fee structure disclosed on the Interface for each Market.
3.3 Liquidation can occur at any time, without notice to you, including while you are asleep, offline, or unable to access your Wallet or the network, and including during periods of extreme volatility in which the price you receive is materially worse than the prevailing market price.
3.4 Liquidation on the Protocol is executed by a monitored liquidation operator. This creates a specific dependency risk: if that service fails, is delayed, is congested, is offline, is under-capitalised or is otherwise unable to act, eligible positions may not be liquidated.
3.5 A failure to liquidate does not benefit you. It increases the risk that the Protocol accrues bad debt, which may be borne by Suppliers. Conversely, no person owes you any duty to liquidate at a favourable price, at a favourable time, or in any particular order.
3.6 Risk parameters, including maximum LTV, Liquidation Threshold and Liquidation Penalty, may be changed at any time by the Protocol Administrator or the Curator. A parameter change may cause a previously healthy position to become immediately eligible for Liquidation.
4. ORACLE AND PRICING RISK
4.1 All valuations, borrowing capacity and Liquidation decisions depend on Oracle price data supplied by third parties, currently RedStone push feeds as primary and Pyth Network as backstop.
4.2 Oracle prices may be stale, delayed, inaccurate, manipulated, censored or unavailable. Push feeds update only on a defined deviation threshold or heartbeat and will not reflect intra-threshold price movement. Consequently, the price used by the Protocol may differ materially from the price observable on any market.
4.3 A faulty, manipulated or stale Oracle price may cause: unwarranted Liquidation of a healthy position; failure to liquidate an unhealthy position; over-borrowing against inflated Collateral; or systemic bad debt.
4.4 The Protocol is designed to “fail closed”: where price data is missing or older than the configured tolerance, the affected asset or Market may be halted. During a halt you may be unable to supply, borrow, repay, withdraw or reduce your position, for an indefinite period, including during a market crash. A halt may itself cause you loss.
4.5 Wrapped assets may be priced by a reference feed. Certain assets may be priced using a shared reference feed for an underlying asset rather than a feed specific to the wrapped, bridged or synthetic representation you hold. A de-peg, redemption failure or loss of backing affecting the wrapper may therefore not be reflected in the price used by the Protocol, and the Protocol may continue to treat that asset at the reference price, allowing borrowing against collateral that has, in fact, lost value.
4.6 Where no suitable third-party feed exists, the Operator may operate its own price feed contracts subject to on-chain bounds and deviation limits. This introduces an additional point of failure and an additional conflict of interest, as the Operator both sets risk parameters and, in those cases, supplies the price.
4.7 Oracle providers are third parties. They may change their methodology, discontinue a feed, deprecate an asset, or cease to operate.
5. LIQUIDITY AND WITHDRAWAL RISK
5.1 Supplied Digital Assets are lent to Borrowers. Your ability to withdraw depends on there being unutilised liquidity in the relevant Market at the time of withdrawal.
5.2 Where utilisation is high, withdrawal may be delayed, restricted to a partial amount, or unavailable until Borrowers repay or new liquidity is supplied. Interest-rate models are designed to incentivise, but cannot compel, such repayment or supply.
5.3 In a stress scenario, many Suppliers may seek to withdraw at once. You should assume that liquidity will be least available at precisely the time you most want to withdraw.
6. BAD DEBT AND SOCIALISED LOSS
6.1 If Collateral realised on Liquidation is insufficient to repay the associated debt — for example because of a price gap, a network outage, an oracle failure or a liquidation-service failure — the shortfall constitutes bad debt.
6.2 Bad debt in a Market may be borne by the Suppliers to that Market, in whole or in part, through a reduction in the value or redeemability of their positions. You may therefore suffer loss caused entirely by the conduct, positions or losses of other Users, over whom you have no control and of whom you have no knowledge.
7. CURATOR AND PARAMETER RISK
7.1 The risk configuration of each Market and Vault, including which assets are listed, which Oracles are used, LTV and Liquidation Thresholds, caps and interest-rate models, is determined by the Curator.
7.2 The Operator may be the Curator. The Operator therefore may have a structural conflict of interest (it sets the risk parameters of the Markets from which it derives protocol revenue).
7.3 A Curator may make errors of judgement, may set parameters that prove inadequate in a stress event, may list an asset that fails, may select an Oracle that fails, or may allocate Vault assets to a Market that incurs bad debt. The Curator owes you no duty of care, skill or prudence, and is not liable to you for any curation decision.
7.4 Curator decisions may be implemented immediately or subject to a timelock, depending on the configuration of the relevant contract. Where there is no timelock, you may have no opportunity to exit before an adverse change takes effect.
8. ADMINISTRATIVE, GOVERNANCE AND RISK
8.1 A Protocol Administrator administrates asset listings, risk parameters, access gates, oracle configuration, contract upgrades and emergency pause and freeze functions.
8.2 A Protocol Administrator can, at any time and without notice: pause the Protocol; freeze a Market; change parameters; upgrade contracts; and revoke Access Tokens. Any of those actions may prevent you from withdrawing, repaying or protecting your position.
8.3 Emergency revocation of an Access Token is available for compliance purposes. Revocation may leave you unable to open new positions, and may occur without prior notice.
9. PERMISSIONED ACCESS RISK
9.1 Access to the Protocol requires a non-transferable Access Token bound to your Wallet.
9.2 If you lose access to that Wallet, you lose access to the Access Token. The Access Token cannot be transferred to a new Wallet and the Operator cannot recover it or your positions.
9.3 Access may be refused, suspended or revoked at any time under the Terms, including for reasons unrelated to your conduct.
9.4 Two revocation paths exist. Ordinary revocation is designed not to apply to an asset in which you hold an open position. Emergency revocation is not subject to that protection. If exercised, you may be unable to add Collateral, repay debt, withdraw or otherwise manage an open position, including where doing so would have avoided a Liquidation.
10. BLOCKCHAIN NETWORK RISK
10.1 The Protocol is deployed on the Hemi network (chain ID 43111) and any other blockchain network on which such smart contracts may be deployed from time to time. Hemi is an emerging network which may have a smaller validator, sequencer or security set, lower liquidity and less battle-tested infrastructure than more established networks.
10.2 Blockchain networks may experience congestion, outage, halt, sequencer failure, censorship, chain re-organisation, hard fork, consensus failure or attack. Any of these may prevent transactions from being submitted or confirmed at the time you need, including transactions to add Collateral, repay debt or withdraw.
10.3 Gas and transaction fees are payable by you, may spike unpredictably, and may make a transaction uneconomic or impossible to execute.
10.4 Bridged, wrapped or synthetic assets (including, where applicable, hemiBTC, WBTC and WETH) carry additional risk of bridge exploit, custodian failure, redemption failure and depeg from the underlying asset.
10.5 Stablecoins (including USDT and USDC.e) are issued by third parties and may lose their peg, be frozen, be blacklisted at the issuer level, or become non-redeemable. A blacklisting of the Protocol’s or your address by an issuer may render assets permanently inaccessible.
11. INTEREST RATE RISK
11.1 Borrow and supply rates are variable and determined algorithmically by reference to utilisation. Rates may rise sharply and without notice, materially increasing the cost of your borrowings and accelerating the deterioration of your Health Factor.
11.2 Displayed rates are indicative estimates only and do not constitute a promise of any yield. Historical or projected rates are not indicative of future rates.
12. SECURITY, WALLET AND USER RISK
12.1 You are solely responsible for the security of your Wallet, private keys, seed phrase, devices and credentials. The Operator does not hold, store or have access to your private keys and cannot recover them or any Digital Assets lost as a result of their loss or compromise.
12.2 You are at risk of phishing, malicious front-ends, fake domains, malicious browser extensions, clipboard hijacking, malware, SIM-swap attacks, wallet-drainer approvals and social engineering. Always verify the domain and the contents of any transaction you sign.
12.3 Granting a token approval to a smart contract creates ongoing risk. You should review and revoke unnecessary approvals.
12.4 The Interface may itself be compromised, spoofed or subject to DNS hijacking or supply-chain attack.
13. FLASH-LOAN RISK
13.1 Flash-loan functionality is disabled as at the Effective Date. If it is enabled, the following additional risks apply.
13.2 A flash loan is uncollateralised and must be borrowed and repaid within a single transaction. If repayment fails, the entire transaction reverts and you lose the gas expended.
13.3 Flash loans are a primary tool for oracle and price manipulation attacks against lending protocols. Enabling flash loans materially increases the attack surface of every Market and Oracle on the Protocol, including Markets in which you hold a position but which you do not use for flash loans. A successful flash-loan-assisted attack may cause bad debt borne by Suppliers.
13.4 A flash-loan premium is payable and is not refundable if the transaction reverts.
13.5 Constructing flash-loan transactions requires technical expertise. Errors in construction may result in total loss of gas and, where combined with other operations, in loss of Digital Assets.
14. CRYPTOGRAPHIC AND TECHNOLOGICAL OBSOLESCENCE RISK
14.1 The Services depend on cryptographic primitives. Advances in cryptanalysis, quantum computing or other technology may weaken or compromise the cryptography on which blockchain networks, wallets, signatures and the Protocol depend, potentially resulting in theft or loss of Digital Assets. No Protected Person is liable for any such event.
15. THIRD-PARTY DEPENDENCY RISK
15.1 The Services depend on third parties, including Wallet providers, Oracles, RPC and node providers, bridges, blockchain analytics providers and hosting providers. Failure, error, outage, insolvency, discontinuation or change of terms by any such third party may adversely affect the Services and cause you loss.
16. REGULATORY AND LEGAL RISK
16.1 The legal and regulatory treatment of Digital Assets and decentralised finance is uncertain, differs by jurisdiction and is changing rapidly.
16.2 Legislative or regulatory change, supervisory guidance, enforcement action or judicial decision in any jurisdiction may, at any time and without notice: restrict or prohibit your access to the Services; require the Operator to suspend or terminate the Services; require the imposition of identity verification; adversely affect the value, transferability, legality or usability of any Digital Asset; or expose you to liability.
16.3 It is your sole responsibility to determine whether your access to and use of the Services is lawful in every jurisdiction applicable to you, and to comply with all applicable laws, including tax, sanctions, anti-money-laundering, exchange-control and reporting obligations.
16.4 The Operator relies on legal advice obtained in respect of its own operations. That advice is given to the Operator only. It is not addressed to you, may not be relied upon by you, does not constitute advice to you, and gives you no assurance that your own use of the Services is lawful.
16.5 The taxation of Digital Asset transactions, including supply interest, incentives, Liquidation and disposals, is complex and may result in tax liabilities exceeding your realised gains. You should obtain independent tax advice.
17. NO TOKEN
17.1 As at the Effective Date there is no BNQ protocol governing token. No token sale, airdrop, presale or allocation has been authorised by the Operator.
17.2 Any person offering, selling or promoting a BNQ protocol governing token is not authorised by the Operator and should be treated as fraudulent. Do not interact with any such offer.
18. NO ADVICE
18.1 Nothing in this Statement, the Terms, the Interface or the Documentation is investment, legal, accounting or tax advice, a recommendation, or an offer or solicitation. The Operator does not assess suitability or appropriateness for you.
19. ACKNOWLEDGEMENT
19.1 By accessing or using the Services you acknowledge and agree that:
- you have read, understood and accept every risk described in this Statement;
- you understand that this Statement does not describe all risks and that unknown and unforeseeable risks exist;
- you have made your own independent assessment and have taken such professional advice as you consider appropriate;
- you can bear the total loss of all Digital Assets you commit to the Protocol; and
- you proceed entirely at your own risk, and you release each Protected Person from all claims in respect of the risks described in this Statement to the maximum extent permitted by law.