Risks

Each section states what can happen, who it hits, what reduces it, and what does not. Guardrails limit losses. They do not prevent them.

Market risks

Gap larger than premium plus stake

What can happen. Inventory not sold by the close is carried overnight or over a weekend. The stock opens lower and the warehouse is marked down at the print.

How it hits. The premium already collected offsets the first part. Beyond it, staked $BLOT is burned. Beyond the stake, the share price falls and depositors bear the rest.

What mitigates it. Inventory caps bound the exposure. Unwinding during the session shrinks what is carried.

What does not. The bonus is a small fraction of a position, and a single-stock gap can be several times larger. The stake is finite and denominated in $BLOT, whose value can fall in the same stress. The pool cannot sell outside market hours, so it cannot react to news during the freeze.

Inventory concentration

What can happen. Liquidations cluster in falling stocks. The warehouse fills with the worst performers, often from one sector.

How it hits. One ticker or sector drives the result of the whole pool, for stakers first and depositors next.

What mitigates it. The ticker and sector caps.

What does not. Caps limit size, not correlation. A market-wide decline hits every position at once.

Liquidity and withdrawal queue

What can happen. After a wave of liquidations, most of the pool is inventory. Withdrawal requests exceed free USDG and enter the queue.

How it hits. Depositors wait, with no fixed upper bound, and may stay exposed to the warehouse meanwhile. Stakers are not directly affected.

What mitigates it. The withdrawal reserve. Shares are transferable.

What does not. The reserve is only a fraction of the pool. Transferability is not liquidity: there may be no buyer for shares, or only at a discount.

Dependency risks

Issuer risk

What can happen. The issuer of a Stock Token can pause transfers, block addresses, force-burn balances or upgrade the token contract. Any of these can apply to the pool or to the AMM.

How it hits. Inventory that cannot be transferred cannot be sold. Inventory that is burned is gone. The loss falls on the stake first, then on depositors. USDG is also an issued asset and carries the same kind of risk.

What mitigates it. Ticker caps limit exposure to any one token.

What does not. No on-chain rule overrides an issuer's administrative powers. The oracle may keep valuing frozen tokens at full price, so the share price can overstate what is recoverable.

Oracle dependency

What can happen. The feed, or the session and halt signal, can be wrong, delayed or manipulated. The oracle price can diverge from the price at which tokens trade on-chain.

How it hits. A price that is too high makes the pool overpay for collateral and overstate its assets. Holders who exit at an overstated share price do so at the expense of those who stay.

What mitigates it. The heartbeat rule blocks seizures and sales on stale prices.

What does not. A heartbeat detects a silent feed, not a wrong one. A fresh, incorrect price passes every check.

Smart contract risk

What can happen. A bug in the pool, the staking contract, a lending market, an AMM or a token contract is exploited.

How it hits. Potentially total loss of the pool's assets and of the stake. The waterfall offers no protection against theft.

What mitigates it. Standard interfaces and a narrow scope reduce the surface.

What does not. No audit has been published. One would not prove the absence of bugs, nor cover the external contracts the pool depends on.

Protocol and external risks

Governance and parameter risk

What can happen. A cap is raised, a venue approved, a market listed. A change can be mistaken, or made under pressure to absorb more.

How it hits. Depositors and stakers find themselves in a riskier pool than the one they entered.

What mitigates it. Every parameter and every change is visible on-chain.

What does not. Visibility is not a veto. Who can change parameters, and with what delay, is not published yet. Assume they can change faster than a queued withdrawal completes.

Regulatory and availability risk

What can happen. Stock Tokens are regulated products, available only in some jurisdictions. Rules can change. Access to the tokens, an interface or $BLOT itself can be restricted.

How it hits. A holder may be unable to deposit, withdraw through an interface, or sell. Restrictions on a Stock Token can drain AMM liquidity and slow the unwind.

What mitigates it. Contracts remain callable on-chain independently of this site.

What does not. On-chain access does not make an activity lawful where you live. Blotter is not available where Stock Tokens are not available. See Legal.

What this adds up to

These risks are not independent. A sharp decline can bring a gap, concentration, a long queue and a falling $BLOT price in the same week. Judge the pool on that week, not on a calm one. The simulator tests adverse gaps with fictional funds, and leaves out issuer, oracle and contract failures.