Risks

Using Rhizome can result in partial or total loss. Market isolation narrows some exposures but does not remove risk.

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Smart contract risk

An error in the Morpho core, interest rate model, oracle contracts, Rhizome wrapper, tokens, or integrations could cause incorrect accounting, frozen actions, or loss. Upstream reviews do not automatically cover Rhizome-specific deployment and oracle code. TODO: Add independent Rhizome audit reports if and when they are published.

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Oracle risk

An oracle can be stale, unavailable, manipulated, misconfigured, or fresh but wrong. Rhizome rejects stale monitored feeds, but the guard does not bound a fresh answer against another price source. USDRIF is treated as USD 1 in the initial oracle configuration, creating depeg exposure.

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Collateral risk

Collateral can lose value rapidly, become non-transferable, or have unexpected token behavior. A conservative LLTV reduces but does not eliminate this risk.

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Liquidity risk

Lenders may be unable to withdraw while supplied assets are borrowed. Liquidators may also lack sufficient loan-token or trading liquidity to close unsafe positions efficiently.

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Liquidation risk

Borrowers can lose collateral when debt exceeds the LLTV limit. Interest, price changes, network conditions, and oracle updates can move a position into liquidation.

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Bad debt risk

Fast price moves, unavailable liquidation liquidity, or delayed execution can make collateral insufficient to repay debt. Recognized bad debt reduces the assets backing lenders in that market.

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Permissionless market risk

Anyone can create a market using an enabled IRM and LLTV. A created market is not necessarily reviewed or supported by Rhizome. Users must evaluate its tokens, oracle, parameters, liquidity, and integrations independently.

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Rootstock and infrastructure risk

Network congestion, reorganization, RPC failure, wallet failure, or indexer lag can delay or misrepresent actions. Current safety-critical state must be read from Rootstock, not inferred only from indexed data.