> ## Documentation Index > Fetch the complete documentation index at: https://docs.synclear.io/llms.txt > Use this file to discover all available pages before exploring further. # Risk Disclosure for Synclear Protocol Participants > A full disclosure of material risks associated with using Synclear, including smart contract, credit, liquidity, oracle, regulatory, and custody risks. Participation in Synclear — whether as a borrower, lender, vault depositor, or mandate operator — involves material financial risk. The disclosures below describe the primary risk categories that participants should understand and evaluate before engaging with the protocol. This document is updated as the protocol evolves; participants are responsible for reviewing the current version before each material interaction. **This page is a risk disclosure, not financial or legal advice.** Nothing contained herein constitutes an offer to sell or a solicitation to buy any financial instrument, nor should it be relied upon as investment, legal, or tax advice. Synclear does not assess the suitability of its products for individual users. All participants engage with the protocol at their own risk and are solely responsible for their own due diligence. *** Synclear's protocol is implemented as a set of smart contracts deployed on public blockchains. Smart contracts are immutable (or governed-upgradeable) programs whose behavior is determined entirely by their code. Despite rigorous auditing and testing, smart contracts may contain undiscovered bugs, logic errors, or vulnerabilities that could result in partial or total loss of funds. **Key dimensions of this risk:** * **Undiscovered vulnerabilities:** No audit can guarantee the absence of all bugs. Exploits may target code that has been reviewed and is considered sound. * **Composability risk:** Synclear integrates with external protocols (oracle providers, coverage protocols, yield sources). Vulnerabilities in integrated protocols can propagate to Synclear. * **Upgrade risk:** Where contracts are upgradeable, the upgrade mechanism itself represents an additional attack surface. Synclear's governance time-locks mitigate but do not eliminate this risk. * **Dependency risk:** Smart contracts depend on underlying blockchain infrastructure. Chain-level issues (consensus failures, chain reorganizations) can affect contract state. Participants should review all published audit reports and only commit capital they are prepared to lose in a worst-case scenario. Synclear is a credit protocol. Lenders and depositors are exposed to the credit risk of borrowers — the risk that borrowers fail to repay their obligations. While the protocol uses over-collateralization and automated liquidation to mitigate this risk for standard credit pools, residual credit risk remains. **Key dimensions of this risk:** * **Over-collateralized positions:** Borrowers who breach their LTV threshold are subject to liquidation. However, in fast-moving markets or periods of low liquidity, the value of collateral may decline below the loan principal before liquidation can complete, resulting in a shortfall to lenders. * **Institutional/mandate pools:** Some credit pools extend credit to institutional borrowers with partial or no on-chain collateral, based on KYB verification and mandate terms. These pools carry direct credit exposure to the borrower's ability and willingness to repay. * **Pool operator risk:** Credit pool terms are set by pool operators. Misconfigured or malicious pool parameters could expose lenders to elevated risk. Participants should review pool parameters carefully. * **Concentration risk:** Pools with a small number of borrowers are more sensitive to a single default. Lenders in junior tranches of structured credit pools accept explicit first-loss exposure in exchange for higher yield. This is an explicit risk taken on by design. Liquidity risk is the risk that a participant cannot exit a position at an expected price or within an expected timeframe. **Key dimensions of this risk:** * **Vault withdrawal queues:** Savings vaults may implement withdrawal queues or notice periods, particularly when underlying credit pools have term-locked capital. Participants may not be able to withdraw instantly. * **Credit pool liquidity:** Lenders in direct credit pools are typically locked until loan repayment or pool maturity. Secondary markets for credit pool positions may be limited or non-existent at any given time. * **Collateral liquidation slippage:** In distressed market conditions, the on-chain liquidation of collateral assets may occur at prices materially below pre-liquidation market values, particularly for illiquid collateral types. * **Stablecoin liquidity:** If yield strategies hold assets in stablecoin protocols, depegging events at the stablecoin level can affect the redemption value of vault shares. Participants should assume that capital committed to credit pools or term-locked vaults is illiquid for the duration of the commitment period. Synclear relies on external price oracles to determine collateral values, trigger liquidations, and calculate LTV ratios. Oracle failure or manipulation can cause the protocol to act on incorrect price data, resulting in mispriced loans, incorrect liquidations, or failure to liquidate when warranted. **Key dimensions of this risk:** * **Price manipulation:** Flash loan attacks and coordinated market manipulation can temporarily distort oracle prices. Synclear uses time-weighted average prices (TWAPs) and multi-source aggregation to reduce this risk, but manipulation cannot be fully eliminated. * **Oracle downtime:** If an oracle feed becomes unavailable (stale data, node outages), the protocol may be unable to process liquidations or new drawdowns until the feed recovers. Circuit breakers may halt operations during outages. * **Feed accuracy:** Oracles report prices based on market data from their source providers. Significant discrepancies between oracle-reported prices and actual market prices — particularly for less liquid assets — can affect protocol operations. * **New asset feeds:** Collateral assets newly added to the protocol may rely on less mature oracle infrastructure with higher risk of inaccuracy or manipulation. The regulatory treatment of decentralized finance protocols, CeDeFi credit products, and on-chain assets varies significantly across jurisdictions and is evolving rapidly. Participants may be subject to legal and compliance obligations that differ from those applicable to traditional financial products. **Key dimensions of this risk:** * **Jurisdictional restrictions:** Synclear's products may not be legally accessible to participants in certain jurisdictions. It is each participant's responsibility to determine whether their use of Synclear is lawful in their jurisdiction. * **Regulatory change:** Future regulatory changes could restrict or prohibit the use of on-chain credit protocols, require licensing, or impose obligations (reporting, withholding) on participants. Such changes could affect protocol operations, the availability of specific products, or the value of positions. * **Asset classification risk:** The regulatory classification of digital assets used within Synclear (as securities, commodities, or otherwise) may affect how positions and returns are treated under applicable law. * **KYB/AML enforcement:** Participants who provide inaccurate information during KYB onboarding, or who attempt to circumvent compliance controls, may have their accounts suspended and may face legal consequences. Participants should seek independent legal advice regarding their obligations before engaging with Synclear. Assets within Synclear's protocol are held either in smart contracts (on-chain) or in custody arrangements with institutional custodians (off-chain). Both custody modes carry distinct risks. **Key dimensions of this risk:** * **Smart contract custody:** On-chain assets held in protocol contracts are exposed to smart contract risk (see above). There is no centralized custodian to reverse unauthorized transactions. * **Institutional custodian risk:** Assets held with third-party institutional custodians are subject to the custodian's operational risks, including insolvency, fraud, cybersecurity incidents, and regulatory action. Custodian insurance covers certain loss categories within policy limits but does not provide a full guarantee. * **Key management risk:** Self-custodied assets (e.g., wallet keys used to interact with Synclear) are entirely the user's responsibility. Loss of private keys, phishing, and unauthorized access are not recoverable by Synclear. * **Bridge risk:** Assets bridged between networks (e.g., Ethereum Mainnet to Base) pass through bridge contracts that represent an additional custody layer with their own risk profile. Participants using institutional custody legs of the protocol should review the relevant custodian's terms, insurance coverage, and regulatory standing independently. *** ## Acknowledgement By using Synclear's protocol, participants acknowledge that they have read and understood the risks described in this disclosure, that they are not relying on Synclear for financial or legal advice, and that they accept full responsibility for their own participation decisions. Synclear does not guarantee the safety of funds, the accuracy of on-chain data, or the availability of protocol services at any given time.