Risks
Risks to Suppliers (USD3 / sUSD3)
Smart-contract risk: Bugs, oracle failures, or economic exploits. Mitigations: third-party audits, formal-verification of rate math, circuit breakers.
Fraud risk: Merchant fails to repay specified amount due to first-party fraud (no intent to repay), second-party fraud (colluding with another identity to connect a bank account not owned by the owner of the address private key), third-party fraud (fraudster uses compromised identity from database breach or synthetic identity not owned by the owner of the address private key).
Credit default risk. Merchants fail to repay specified amount due to lack of willingness to repay, shortfall in assets due to price risk, and other idiosyncratic risks such as loss of private keys or hack. Mitigations: 3CA underwriting, junior first-loss tranche (sUSD3), dynamic DRP pricing, monthly model refresh, external collections via Credit Slasher.
Liquidity risk. Redemption requests exceed the cash buffer. Mitigations: idle capital parked in Aave for instant withdrawal, utilization-linked base rate, redemption queue with time-based throttling.
Oracle & rate-feed risk Manipulated price or SOFR feeds distort LTVs and rates. Mitigations: redundant Chainlink feeds, internal TWAP guards, emergency “pause & price-lock” switch.
Governance / upgrade risk. Malicious or negligent parameter changes. Mitigations: multisig with time-lock, published upgrade roadmap, veto window for USD3 governance token holders (road-map).
Risks to Merchants
Privacy & data-leak risk. Exposure of KYC, bank, or bureau data. Mitigations: minimal viable data stored, off-chain encrypted storage, hashed proofs on-chain.
Collateral-valuation drift. Haircuts may tighten, lowering credit limit or spiking implied rates. Mitigations: monthly re-scoring, merchant dashboard alerts for material changes.
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