Risk

Understanding Funding Risk.

Collateralized funding carries risk at every stage of a position's lifecycle. Foundry markets are designed to expose those parameters rather than hide them. This page summarizes the principal risk categories.

Collateral & market risk

The value of tokenized collateral can move sharply. Haircuts are applied to absorb expected volatility, but severe or sudden price movements may still leave a position under-collateralized before it can be adjusted or unwound.

Liquidity risk

Both the collateral asset and the funding asset depend on available liquidity. In stressed conditions, exiting or refinancing a position may be difficult or occur at unfavourable prices.

Smart contract risk

Foundry is protocol software. Bugs, economic exploits or upgrade errors in the contracts, or in integrated protocols, could result in partial or total loss of funds.

Counterparty & issuer risk

Tokenized real-world assets depend on off-chain issuers, custodians and legal structures. The failure, insolvency or misconduct of any of these parties can impair the underlying collateral regardless of on-chain state.

Interest-rate & term risk

Funding is offered for fixed terms. Rates available at maturity — for repayment, roll or refinance — may differ materially from the original terms.

Regulatory risk

The regulatory treatment of tokenized assets and on-chain funding is evolving and varies by jurisdiction. Changes in law or enforcement may affect availability, cost or legality of participation.

This page is informational and does not constitute financial, investment, legal or tax advice. Assess your own circumstances and seek professional advice before using any funding protocol.