Risks

By using the MORE Markets, you acknowledge and assume the associated risks.

Below is an overview of key risks to be aware of when using MORE Markets. This list is not exhaustive and may not cover all potential risks.

Smart Contract Risk

The MORE smart contracts may contain vulnerabilities or bugs in its smart contracts. Although various security measures are in place, including:

• Immutable core contracts,

• A public code base consisting of simple, legible code,

• Audit and formal verification by Omniscia,

• A bug bounty program.

Oracle Risk

Each MORE market relies on an oracle, established at market creation. No oracle is completely resistant to price manipulation, which may lead to liquidations or bad debt. However, the resilience of oracles can vary.

In evaluating the dependability of an oracle, it's important to consider its safety and responsiveness, particularly if it operates on a centralized basis. Additionally, examine the configurations and procedures associated with updating prices.

Credit Attestation Service Risk

For undercollateralized lending MORE markets rely on third party credit attestation services.

These services introduce specific risks that users should be aware of, as they assess borrowers' creditworthiness using both on-chain and off-chain data. The key risks include:

• Data inaccuracies: Credit assessments may be flawed due to inaccurate algorithms, incomplete data, or errors in the inputs. This can lead to incorrect credit scores, resulting in under-collateralized loans and higher default risks, potentially causing financial losses for lenders.

• Reliance on data sources: The quality and reliability of the data are critical. There is a risk that the information used, especially from off-chain sources, may be outdated or manipulated.

• Privacy concerns: Credit attestation services handle sensitive financial data may be at risk of data breaches or misuse.

• Legal and regulatory compliance issues: Due to the off-chain reliance on debt recovery and legal recourse, credit attestation services may need to navigate complex legal landscapes, especially when dealing with cross-border scenarios, which could complicate asset recovery in the event of borrower defaults.

• Dynamic risk assessment: The changing nature of credit assessments means that borrowers' risk profiles can change rapidly, requiring users to continuously monitor their positions to avoid sudden downgrades or liquidation events.

Counterparty Risk

Prior to participating in a market, it is crucial to rigorously assess the loan and collateral assets. Analyze elements like centralization; centralized control may result in the blacklisting of certain users or MORE itself, potentially causing financial losses.

Additionally, the distribution pattern of the asset merits attention, as a high level of concentration may lead to severe price volatility.

Liquidation Risk (for Borrowers)

Each MORE market has a fixed LLTV ratio and specific, fixed LLTVs for premium borrowers. If your position's LTV exceeds this LLTV, your position will be liquidated. When borrowing on MORE, it’s essential to choose your market carefully and continuously monitor the health of your position to avoid liquidation.

This is even more important for premium borrowers as liquidations can lead to a loss of funds in an undercollateralized scenario and have an effect on borrow capacity in the future. Additionally, premium borrowers must remain attentive to their broader portfolio, especially positions used in their credit assessment as a change in credit rating may also lead to a liquidation event.

Bad Debt Risk (for Lenders)

In certain situations, the value of the collateral for a position may drop below the amount borrowed before liquidation is possible. Under these circumstances, borrowers will not likely settle their debts, creating a scenario of bad debt. MORE has implemented a system to manage such bad debts by allocating losses evenly across lenders, resulting in the immediate realization of financial losses for them.

However, for premium borrowers, liquidations are intentionally triggered at LTV ratios higher than the prevailing standard market LTV. In these cases, the credit attestation service has legal recourse against the rated borrowers, so a different mechanism is needed. For this, MORE Markets introduces the novel concept of debt tokens, which you can read about here.

Liquidity Risk (for Lenders)

Liquidity risk refers to the possibility that you may not be able to withdraw your supplied assets due to a lack of liquidity in the market. MORE addresses liquidity issues through its AdaptiveIRM interest rate model.

Before supplying liquidity, understand the market’s interest rate model to gauge the expected liquidity level and the likelihood of withdrawal delays.

Conclusion

This documentation is intended to provide a general understanding of the risks associated with using the MORE Markets. Always conduct thorough research and consider all potential risks before using the platform.