Risk overview
Note Systems is experimental financial software on a new chain, using tokenised securities that carry their own restrictions. Read this section before depositing.
Who bears what
Section titled “Who bears what”| Risk | COUPON holder | SHIELD holder | Desk depositor | NOTE / sNOTE holder |
|---|---|---|---|---|
| Market: stock falls below the barrier at maturity | Loses 1 − S_T/s0 of principal | Protected | Same as COUPON | Indirect via Treasury reserves |
| Market: stock falls but stays above barrier | Loses nothing; may miss coupons | Unhedged on the drawdown | Same as COUPON | — |
| Oracle: wrong or delayed price | Wrong or delayed coupon and settlement | Same | Same | Treasury valuation |
| Issuer / Stock Token: freeze, restriction, delisting | Receives restricted tokens on breach | Tokens locked in escrow | Same as COUPON | Treasury holdings |
| Smart contract | Total loss of escrowed assets in the worst case | Same | Same | Same |
| Regulatory | Access loss, forced unwind | Same | Same | Token price, access |
| Token design: NOTE trades far below reserve | — | — | — | Loss; floor redemption is capped |
| Liquidity: no secondary market for legs | Locked until settlement | Locked until settlement | Queue | sNOTE cooldown (3 days in spec, 7 days in deploy script, est.) |
| Governance: malicious or negligent timelock | Parameter or oracle abuse (bounded by design) | Same | Same | Treasury withdrawal |
What the design does protect
Section titled “What the design does protect”- Full escrow. Every coupon and every principal payment is funded before a series goes live. There is no counterparty who can fail to pay. See Escrow invariant.
- Deterministic settlement. Observations happen only at official closes; a post-close print cannot leak in. See Oracle and MarketCalendar.
- No liquidations, no margin. Positions cannot be force-closed by a price move.
- Isolation. One series’ problem cannot draw on another series’ escrow.
What it does not protect
Section titled “What it does not protect”- The direction of the stock.
- The solvency and conduct of the Stock Token issuer, the stablecoin issuer, or the oracle operator.
- Bugs in the protocol contracts. No third-party audit has been completed. See Audits.
- Your legal eligibility to hold Stock Tokens. Stock Tokens are not available to US persons and are restricted in several other jurisdictions. See Regulatory.
Nothing in these documents is investment, legal or tax advice.