Risk Overview
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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
| 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 | Conditional USDG settlement against delivered stock; coupon and fee costs remain | Same as COUPON | Indirect via Treasury reserves |
| Market: stock falls but stays above barrier | Cash principal at maturity under the stated conditions; may miss coupons and still bears issuer and contract risk | 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 governance | Parameter or oracle abuse (bounded by design) | Same | Same | Treasury withdrawal |
What the Design Does Protect
- Funded obligations. The note core escrows assets backing matched obligations before a series goes live. This reduces funding risk but does not remove issuer freezes, transfer restrictions or contract failures. See Escrow invariant.
- Deterministic settlement. Observations happen only at official closes; a post-close print cannot leak in. See Oracle and MarketCalendar.
- No core liquidation engine. A price move does not trigger margin calls in the note core. Separate borrowing against wrapped legs can be liquidated.
- Isolation. One series’ problem cannot draw on another series’ escrow.
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. The external audit of the contracts is in progress and its report is not yet published. 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.
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