Risk Disclosure

Risk Disclaimer

Interacting with tokens, issued using Ember Protocol technology, involves risks, and it is important for Users to understand these risks before engaging. Ember Protocol does not provide investment advice, manage assets, or make investment decisions. The Protocol and its Website provide only the technological infrastructure that enables users to interact with independently managed vaults.

Each vault is operated and managed by third-party Vault Managers, who are solely responsible for defining and executing their respective strategies. Ember Protocol does not control, direct, or influence vault strategies.

While Ember Protocol seeks to maintain the security and reliability of its infrastructure, it cannot eliminate all risks associated with decentralized finance (DeFi), including smart contract vulnerabilities, blockchain congestion, and market volatility. Users should ensure they understand these risks before interacting with any vault.

Before making any decision, users are strongly encouraged to seek independent professional advice.

Third-Party Project Risks

Collateral assets may be invested in third-party DeFi opportunities. These projects introduce risks that are outside the direct control of Ember Protocol. Such risks include the operational, financial, and regulatory risks associated with these third-party platforms. Issues such as failure of a protocol, changes in terms, or operational mismanagement may directly impact the performance and returns of the Vault, and Ember Protocol bears no responsibility or liability for such external risks.

Collateral Asset Risks

The collateral assets in Ember Protocol issued tokens are deployed across a range of DeFi protocols, each with its own risk profile. Internal factors such as technological failures or operational disruptions within DeFi protocols may further impact the stability and value of the collateral. These assets are subject to potential fluctuations in value, liquidity constraints, and changes in market dynamics and other external factors. In particular, collateral assets may lose value in volatile market conditions, affecting the price of the Underlying Assets. Users should be aware that the risk of asset devaluation could result in a loss of principal, particularly during periods of significant market stress.

Smart Contract Risks

Vault Managers rely on smart contracts to interact with various DeFi protocols. Although Vault Managers take measures to mitigate these risks, such as conducting regular reviews, implementing security best practices, and selecting reputable protocols, these measures cannot guarantee complete protection. Additionally, smart contracts may rely on external data sources (e.g., oracles), which introduce further risks of inaccuracy or manipulation.

Market Conditions and Volatility

Digital assets and DeFi markets are highly sensitive to market conditions and can experience significant volatility. The value of collateral assets and the yields generated through Vaults can be impacted by factors such as general market sentiment, regulatory changes, technological advancements, and macroeconomic events. Market downturns, liquidity shocks, or sudden price movements can impair the performance of Vaults, and may lead to capital losses or the inability to redeem collateral at expected values. Users should consider their risk tolerance and time horizon when evaluating exposure to market volatility.

Execution Risks

Execution risk arises from the possibility that Vault Managers may not be able to efficiently implement their strategy or deploy collateral as intended. This can result from various factors, such as delays in executing trades, network congestion, or technical failures within the DeFi protocols themselves. Additionally, poor timing or errors in transaction execution can lead to suboptimal returns or direct financial losses. While Vault Managers employ automated tools and operational safeguards to mitigate these risks, execution risks remain an inherent feature of decentralized markets and smart contract–based transactions.

Liquidation Risks

The collateral assets in Ember Protocol issued tokens are exposed to liquidation risks, especially in the case of leveraged positions or falling asset prices. If the value of the underlying collateral falls below a specified threshold, or if a DeFi protocol enforces a liquidation event due to market movements, assets may be liquidated at unfavorable prices, potentially resulting in partial or complete losses. Vault Managers work to mitigate this risk by monitoring and adjusting positions as market conditions change, but the inherent volatility in DeFi markets means that liquidation events can still occur, especially during periods of significant market stress.

Regulatory Risks

The DeFi space is still relatively new and is subject to evolving regulations. Changes in regulatory frameworks could impact the operations of DeFi protocols, as well as the ability of Ember Protocol to continue deploying capital in these ecosystems. Regulatory scrutiny, especially in jurisdictions where DeFi is not fully regulated, could lead to restrictions or bans on certain activities, may disrupt Vault operations or limit Users’ ability to interact with the Protocol. Such developments could adversely impact returns, delay redemptions, or result in partial or total loss of assets.

Liquidity Risks

DeFi protocols may experience lower liquidity, higher slippage, or reduced ability to redeem assets quickly. If liquidity is constrained, Ember Protocol may not be able to exit positions or redeem collateral at the expected price, potentially leading to significant losses.

Operational Risks

Ember Protocol success depends on the effective operation of various internal systems and processes. Any failures or inefficiencies in the operational infrastructure, including risk management, compliance, and reporting systems, could lead to financial losses or mismanagement of the strategy. Ember Protocol has implemented robust operational protocols to minimize such risks, but they remain an inherent part of the operation of any financial platform.

Counterparty Risks

Vault Managers may engage with decentralized platforms, liquidity pools, or other participants within the DeFi ecosystem that involve multiple counterparties. These counterparties, including other users, liquidity providers, or protocol operators, are independent third parties and act entirely outside the control of Ember Protocol.

There is a risk that such counterparties may fail to meet their obligations, experience insolvency, or otherwise default. These events could adversely affect the performance of the Vaults, potentially resulting in reduced liquidity, losses in asset value, or temporary inability to access or redeem collateral. Ember Protocol does not assume responsibility for the actions, solvency, or performance of any third-party counterparties.