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Holding USDdw carries risk, including the possible loss of the entire amount you deposit. Capital is at risk for as long as you hold USDdw. This page sets out the main risks and the limits Drakewell applies to each.
[TBC] Draft for counsel review.

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Strategy risk

The trading strategies behind USDdw are delta-neutral and market-neutral, but they can still lose money. Hedges can be imperfect, and spreads between markets can move against open positions. How Drakewell limits it: directional exposure is hedged, margin is kept at low leverage, and the strategies use no recursive collateral structures, looping or high-leverage construction.

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Credit risk

Private credit loans can default. If a borrower defaults and its collateral falls in value or cannot be sold in time, the loan may not be repaid in full. How Drakewell limits it: loans are over-collateralized, so the collateral securing each one is worth more than the amount lent.

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Counterparty and venue risk

USDdw’s credit vaults on Ethereum and Arbitrum are hosted on partner venues, and the strategies run on centralized and decentralized venues. A venue or counterparty can fail, default, restrict withdrawals or restructure. How Drakewell limits it: exposure to any single venue or counterparty is capped, and venues must meet thresholds for TVL, withdrawal reliability and operating track record.

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Smart contract risk

Vault contracts, oracles and the underlying blockchains can contain defects, be exploited or behave unexpectedly. How Drakewell limits it: counterparty protocols and DEX venues need at least two recent independent audits, one of them from a leading firm. Nascent or unaudited platforms are excluded, and most trading runs on centralized venues.

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Liquidity and settlement risk

Redemptions are not instant. They settle on each venue’s schedule and can be delayed or suspended in stress conditions, or processed at a different share price than the one shown when you requested them.

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Rate risk

The fixed rate applies for a vault’s term. Drakewell can reset the forward rate, and a lower rate can apply to later periods.

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Issuer capacity

Drakewell absorbs shortfalls in strategy performance before they reach holders. A loss larger than Drakewell can absorb could still reduce or eliminate what holders receive.

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Data risk

Figures at drakewell.fi and in these docs are read from public blockchains and third-party venues, and can be delayed, estimated or incomplete.