Risk disclosures

Using Merum involves significant risk, including the risk of losing some or all of your assets. Read these disclosures before depositing collateral, borrowing, or supplying. Nothing here is financial or legal advice. This list is not exhaustive.

Smart-contract risk

Merum is a set of smart contracts. Despite independent auditing (see Audits) and a bug bounty (see Bug bounty), software can contain bugs. A vulnerability — in Merum's own contracts, in a dependency, or in the underlying chain — could be exploited to cause partial or total loss of deposited funds. An audit reduces this risk but cannot eliminate it.

Oracle risk

Borrowing limits and liquidations depend on a price oracle. Although Merum uses a composite of Pyth, Chainlink, and an on-chain TWAP with agreement and freshness checks (see Oracles), oracles can still fail. A delayed, manipulated, or incorrect price could trigger liquidations that would not otherwise occur, or could allow a position to be over-borrowed and leave the pool with bad debt. A correlated failure of multiple sources at once is a residual risk.

Liquidation risk

If your loan-to-value reaches the 75% liquidation threshold — typically because the price of Bitcoin falls or your debt grows with accrued interest — part of your collateral will be sold to repay your debt, and you will pay a liquidation bonus to the liquidator (see Liquidations). In fast or volatile markets, liquidations can happen suddenly and may execute at unfavorable prices. You can lose a substantial portion of your collateral. Borrowing close to the maximum LTV greatly increases this risk.

LBTC depeg risk

LBTC (Lombard wrapped Bitcoin) is a tokenized representation of Bitcoin, not Bitcoin itself. Its value depends on the issuer's solvency, custody arrangements, redemption mechanism, and bridge security. If LBTC loses its peg to BTC — through a custody failure, a bridge exploit, a smart-contract bug in the LBTC contracts, or a loss of market confidence — the collateral backing loans on Merum could fall sharply and independently of the BTC price. This could cause liquidations and bad debt even when Bitcoin's own price is stable.

Liquidity and bad-debt risk

Suppliers may be unable to withdraw immediately if pool utilization is high and most USDC is borrowed. In extreme market conditions, liquidations may not fully cover outstanding debt, creating bad debt. Bad debt is absorbed first by protocol reserves and then by suppliers, who could lose part of their deposit.

Interest-rate and market risk

The borrow rate is fixed at 7.9% APR, but your debt grows continuously, raising your LTV over time even if prices are flat. The supply APY is variable and can fall, including to near zero if utilization is low. Crypto-asset prices are highly volatile.

Regulatory risk

The regulatory treatment of DeFi lending is evolving and varies by jurisdiction. Future laws or enforcement actions could restrict or prohibit access to the protocol, affect its operation, or impose obligations on users. Merum is geoblocked in the United States and in OFAC-sanctioned jurisdictions; attempting to evade geoblocking may violate applicable law and these terms. You are responsible for determining whether your use of Merum is lawful where you are. The protocol is operated by Merum Finance FZ-LLC, registered in Dubai.

Operational and key-management risk

Merum is non-custodial: you control your own wallet and private keys. If you lose your keys, no one can recover your funds. Phishing sites, malicious approvals, and compromised devices are common ways users lose funds — always verify you are on the official interface and review every transaction before signing.

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By using Merum you acknowledge that you understand and accept these risks. Do not deposit more than you can afford to lose.