Interacting with Synthereum carries risks.

Software risks

To interact with the protocol, you may use an interface, which is comprised of a front end and a back end that may suffer from a degradation in performance which may result in losses. More specifically such degradation may:
  • slow down the platform or makes it inaccessible;
  • display inaccurate and misleading data;
  • make performing an operation slower.

Cryptocurrency risks

If you lose access to your private key or seed phrase or if it becomes compromised, you will permanently lose access to your funds or your funds could be stolen. When interacting with cryptocurrencies you are responsible of safeguarding your private keys, seed-phrase, or any recovery method and you need to be aware of common attacks such as phishing email, website or applications, keylogger etc.

Trading risks

Trading is a risky activity that can lead to the loss of all your funds. Trading may also create addiction.
Please consult with a professional that might advise you on whether or not trading fits your financial profile and personality.

Protocol risks

The Synthereum protocol is a set of smart contracts holding users and liquidity providers' funds, and is secured using Chainlink and UMA's oracle.

Smart contracts risks

  • smart contracts can carry issues that can be exploited whether maliciously or by accident, leading to the partial or total loss of your funds;
  • you need to authorize a smart contract to interact with your tokens by giving it an allowance; allowance can be given for a specific or unlimited amount; if you were to give an unlimited allowance to a smart contract, and if the latter is being exploited, it could steal the tokens which were given an unlimited allowance.
A security breach or a hack is irreversible and lead in most cases to the total loss of the funds without the possibility of recovering them through legal means or using insurances. There cannot be bug-free software despite respecting all the development best practices and running multiple security audits.

Emergency shutdown risks

Synthereum protocol has an emergency shutdown mechanism that can be triggered in case of a security threat. It will liquidate and burn all the jFIATs, whose holders would receive the equivalent in USDC. As a result, this may lead to a partial or total loss of funds and to various undesired side effects for contracts holding jFIATs. The emergency shutdown could be triggered in case of a security threat by the UMA governance or by the Jarvis core team. The latter will be replaced by a DAO.
The Synthereum protocol uses Chainlink oracle that provides on-chain price feeds for executing trades. Chainlink is aggregating the prices from multiple data providers and multiple data sources, in a decentralized and trustless way, to ensure that the prices you are trading at cannot be altered and that the price feed is never down. This enables trust between the counterparties involved in a trade since they are sure that either counterparty cannot manipulate the price feed, and that the latter is always accessible.
Chainlink has a proven track record demonstrating that even in cases where the Blockchain was congested, they kept updating the prices successfully and in a timely manner. Even though Chainlink is a trusted and battle-tested solution, they could not guarantee that no issue causing users to lose funds will not happen.
  • Because transactions on a Blockchain are not instant, it is possible that the price changes between the time a trade is requested, and the time it is executed, causing the user to trade at a better or worse price. This is called slippage.
  • On-chain price feeds are not in real-time, they are updated every time the underlying asset's price moves by a certain threshold (0.1% on Polygon for most jFIATs, and 0.1 and 0.3% on Ethereum). It means that users may not be able to trade at the real market price, which in some cases may prevent the user to buy, sell or exchange at a more favorable price.
  • On-chain price feeds require to perform a transaction on the Blockchain in order to update the price. When the network is congested, these updates could take a longer time to be performed, which may prevent users to buy, sell or exchange at the most up-to-date prices.
  • On-chain price feeds can accidentally or maliciously provide an incorrect price, which in some cases could occur losses to the user or to the protocol.
Read more about Chainlink: https://chain.link/​

UMA's oracle and liquidation and dispute mechanism risks

Synthereum is a fork of UMA and encompasses all the risks UMA contracts carry. UMA has been audited two times by Open Zeppelin (audit phase 1 and phase 2).
The UMA protocol carries additional risks:
  • The dispute mechanism can be bribed if the market capitalization of the jFIATs is greater than the one of the $UMA token: the latters would lose their economic incentives and could collude.
  • Similar to other protocols, there are currently no economic incentives for liquidating under-capitalized jFIATs (CR below 100%; meaning that the value of its collateral is lesser than its own value).
Learn more about UMA: https://docs.umaproject.org/​


USDC risks

jFIATs main collateral is USDC whose carrying centralized and collateral risks:
  • USDC is a centralized token issued by a US company, carrying regulatory and censorship risks. For example, Circle, the company issuing USDC, could decide or be forced to freeze the USDC in Synthereum’s contract, causing the value of jFIATs to drop to 0.
  • USDC is not fully collateralized by cash deposit: as per the 16th of July, in a publicly available report, Circle announces that USDC is backed at 61% by cash and cash equivalent, the rest being comprised of Certificates of Deposit issued by non-U.S banks, U.S. Treasuries, commercial paper and municipal and corporate bonds. If USDC's own collateral happen to be worth less than a dollar, it could cause the value of jFIATs to drop.
USDC has been chosen as it provides the deepest liquidity and the strongest peg to the dollar among the audited centralized stablecoins; it has been chosen over decentralized stablecoins as it is easier to anticipate its regulatory and centralization risks rather than the technical and systemic one that decentralized stablecoin carry. However, the goal of Synthereum is to be fully decentralized, and therefore, USDC may eventually be replaced by a more censorship-resistant stablecoin.
Learn more about USDC: https://www.circle.com/en/usdc​

Blockchain risks

Synthereum is deployed on Ethereum and on Polygon. Both networks can be congested, which could make it hard to perform a transaction in a timely manner. This could occur a loss to users.

Polygon risks

Polygon Network is an EVM-compatible sidechain in the process of progressive decentralization. As of now, it is secured by a multi-signature setup which carries several risks:
  • there is no way to know if the keys are held by different persons;
  • there is no way to know if the keys have not been compromised, or shared;
  • keys holder(s) could decide, or could be forced to, access to all funds of the network and can bypass the security of the Polygon consensus mechanism to move back funds to Ethereum.