Risk & Security

This page describes the risk profile and security measures applicable to ILN-FR at the product level.

ILN-FR is designed to limit exposure by separating on-chain coordination from off-chain financial operations and by constraining the amount of capital subject to smart contract risk at any given time.

Smart contract exposure

ILN-FR minimizes smart contract exposure by design.

• Principal liquidity and yield are held off-chain with regulated financial entities involved in the operational flow

• Only the amounts required for deposits and requested withdrawals are held on-chain

• On-chain components are used for coordination and access control rather than full custody

This approach significantly reduces the amount of capital exposed to smart contract risk during normal operation.

At any given time, only operationally required amounts are held on-chain, limiting smart contract exposure.

Off-chain custody model

Liquidity allocated to ILN-FR is deployed through contractual arrangements with operating financial entities rather than remaining fully on-chain.

This model:

• Anchors the product to existing financial operations

• Reduces reliance on on-chain custody mechanisms

• Limits exposure to on-chain execution risk

The off-chain custody framework is specific to ILN-FR and documented at the product level.

Vault-level monitoring

ILN-FR includes continuous monitoring of vault activity.

Monitoring focuses on:

• Deposit and withdrawal flows

• Vault state consistency

• Expected operational behavior at the vault level

In the event of abnormal behavior or unexpected conditions, monitoring systems allow for timely review and response.

Transparency, Viewer Access, and Reporting

ILN-FR includes transparency mechanisms designed to provide visibility into product-level activity without granting operational control.

Participants may be provided with viewer access, which consists of read-only, non-operational visibility into balances, cycles, and reporting data. Viewer access does not grant any decision-making authority, veto rights, or influence over the allocation or use of liquidity.

Reporting for ILN-FR is provided at the product level and may be delivered through dashboards, automated reports, or documentation updates. Reporting focuses on observable vault-level information, including opening balances, deployed amounts, accrued returns, payments, and closing balances.

Reporting is informational in nature and does not constitute real-time operational control or management of underlying financial activity.

For ILN-FR, reporting is published on a regular basis, with a target cadence of weekly updates, subject to customary operational delays. Reporting may reflect activity with a short delay and should be interpreted as a transparency mechanism rather than a live operational feed.

Contractual Seniority and Default Handling

The following describes high-level contractual principles applicable to ILN-FR and should be read in conjunction with the product’s full legal documentation.

ILN-FR operates under product-specific contractual terms that include provisions relating to the treatment of liquidity providers in the event of default or disruption.

Under these terms, liquidity providers benefit from contractual seniority, reflecting the parties’ intention that claims relating to provided liquidity receive priority treatment to the maximum extent permitted by applicable law.

This seniority is contractual in nature and does not constitute a security interest, guarantee, or statutory priority. The existence and scope of any such priority are subject to applicable legal limitations and the specific terms governing ILN-FR.

Operational intervention

ILN-FR includes the ability to intervene on-chain when required.

If an anomaly is detected:

• The vault can be paused or frozen

• Further activity can be prevented while the situation is assessed

This capability is designed to allow intervention within a short operational timeframe and to contain issues before they propagate.

Multi-signature controls

Assets held on-chain for withdrawal processing are protected through multi-signature controls.

Multi-signature requirements:

• Reduce single-point-of-failure risk

• Add an additional layer of operational security for withdrawal-related assets

The use of multi-signature controls applies only to on-chain assets involved in the withdrawal process.

Scope and limitations

This page describes the risk and security design of ILN-FR at a high level.

It does not eliminate risk, nor does it cover risks unrelated to product architecture or operational controls. Each participant is responsible for evaluating whether the product aligns with their own risk framework.

The risk and security mechanisms described on this page apply only to ILN-FR. Other BuffX products may operate under different structures, counterparties, risk profiles, and contractual terms, which will be documented separately at the product level.