Trading on cypher
litepaper
Risk Factors
We must be clear, owning an cAsset is not owning a share of the underlying company. It in no way impacts the cap table of the company other than perhaps giving them insight into how traders view a potential public offering. It’s simply a peer-to-peer vote on how much a trader thinks that company should be worth once it goes public. When users acquire cAsset, there is no investment of money, common enterprise, or any reasonable expectation of profits derived from the efforts of others. Any secondary market pricing for cAsset is not within the control of the cypher protocol and it makes no guarantees in respect of the same. For the time-being, cAssets are settled by the payment of cryptocurrency only.
Jurisdictional overreach by regulators and governments.
The cypher protocol is designed to be increasingly and eventually fully decentralized. During initial stages of existence, some parts of the protocol will be centralized to some degree such as market selection and website design and maintenance. While the nature of the protocol is peer to peer and dependent upon decentralized operations, governments may look to the citizenship and / or domicile of software development contributors as a link to jurisdiction. As such, the following items may affect operations of the protocol:
- Changes in the legislative or regulatory environment, or actions by governments or regulators, including fines, orders, or consent decrees;
- Regulatory changes that impact our ability to offer certain products or services;
- Adverse legal proceedings or regulatory enforcement actions, judgments, settlements, or other legal proceeding and enforcement-related costs
Government crackdowns on all cryptocurrency.
Some countries have been exploring or implementing outright bans on “cryptocurrencies.” While we do not feel that our product is a cryptocurrency but rather a protocol that uses underlying blockchain technology to permit trading of digital assets, we may get bucketed with peers and face pressure. This should be mitigated by the decentralized nature of the protocol and its inherent censorship resistance.
Community governance may lead to unintended changes.
The shift to a fully decentralized, community governed model may lead to decisions that adversely affect the long-term success of the protocol.
Protocol bugs.
Despite the aim to have at least two independent audits of the protocol by leading firms, exploits in the software or incentive structure may exist. While we do not maintain custody of any funds, success depends on the proper alignment of architecture with incentives.
As at the date hereof, the cypher protocol is still under development and its design concepts, consensus mechanisms, algorithms, codes, and other technical details and parameters may be constantly and frequently updated and changed. Although this litepaper contains the most current information relating to the cypher protocol, it is not absolutely complete and may still be adjusted and updated by the cypher team from time to time. The cypher team has neither the ability nor obligation to keep holders of $CYPH informed of every detail (including development progress and expected milestones) regarding the project to develop the cypher protocol, hence insufficient information disclosure is inevitable and reasonable.
Risks to minter.
The risk for the minter is that the price of the minted token relative to the collateral token rises so rapidly that the position cannot be recollateralized before being liquidated.
Market volatility could cause cascading defaults.
Trading assets that are inherently volatile with leverage can present increased default / liquidation risk. This is mitigated by a backstop waterfall that draws on (i) having overcollateralized positions, (ii) an insurance fund funded by a portion of protocol trading fees, (iii) socialized losses among non-defaulting participants.
Failure to develop.
There is the risk that the development of the cypher protocol will not be executed or implemented as planned, for a variety of reasons, including without limitation the event of a decline in the prices of any digital asset, virtual currency or $CYPH, unforeseen technical difficulties, and shortage of development funds for activities.
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