> For the complete documentation index, see [llms.txt](https://docs.btcd.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.btcd.fi/token-overviews-1/btcd/key-risks.md).

# Key Risks

## Internal & Legal

* AML/CFT Compliance - All grant recipients, team members, and counterparties undergo OFAC screening to prevent distribution to sanctioned entities.
* VASP Liability - Public materials clarify that the BTCD Foundation does not operate as a Virtual Asset Service Provider, with disclaimers on official documentation.
* Securities Regulation - Ongoing legal assessments and geofencing restrict US and other sanctioned jurisdiction participation to mitigate securities classification risks.
* Key-Person & Governance Risk - Multi-signature governance (e.g., 3-of-5 multisig) with rotating signers and dead-man switch protocols ensures no single individual can unilaterally control treasury or runtime operations.

## External & Protocol

* Custodian Failure - Diversified MPC/multisig custody across providers and jurisdictions reduces single-point-of-failure risk.
* Exchange Counterparty Risk - Hedging on multiple derivatives venues with minimal on-exchange balances and automated withdrawal monitoring limits exposure to insolvency or trading halts.
* Smart Contract Vulnerabilities - Comprehensive auditing (internal and third-party), testnet deployments, Immunefi bug bounties, and continuous on-chain monitoring safeguard against exploits.
* Oracle & RFQ Manipulation - Using TWAP oracles from multiple sources plus circuit breakers defends against price-feed spoofing during mint/redeem windows.
* Liquidation Risk - Conservative or zero leverage on hedges, real-time margin dashboards, and automated deleveraging triggers prevent forced liquidations during volatility spikes.
* Execution Engine Risk - Sanity checks on price feeds and order inputs, unit tests for order routines, and gray-box intervention for large orders prevent trading engine failures.
* Order-Parametrization Risk - Pre-trade validation, parameter bounds, and rollback logic guard against mis­sized or misrouted orders that could induce tracking error.
* Stablecoin De-Peg Risk - Collateral diversification across vetted stablecoins and continuous monitoring plus an insurance buffer protect against backing asset de-pegs.
* Network & DDoS Risk - Enterprise-grade DNS/DMARC configurations, Cloudflare protection, and distributed infrastructure mitigate service interruptions and phishing.