Transparency is a core tenet of the Melt architecture. While the protocol facilitates access to high-value assets, users must understand the underlying risk vectors.
Peg Stability & Liquidity Risk
mAssets are not algorithmically pegged stablecoins. Their value is derived from 1:1 backing and maintained via arbitrage. The mechanism: IfmGOLD trades at 2,000, Market Makers are incentivized to mint new mGOLD at $2,000 (plus fees) and sell it on the book, forcing the price down.
The risk: During extreme volatility, liquidity withdrawal by Market Makers may widen bid-ask spreads and increase exit costs temporarily. However, assets remain fully backed at all times.
Counterparty & Issuer Risk (RWA)
For Real World Assets, Melt functions as a gateway to regulated issuers (e.g., Ondo Finance, Backed Finance). The reality: Token value depends on issuer solvency and custodian reliability. Protocol stance: Melt performs due diligence to list only Tier-1 issuers. However, the protocol cannot control the regulatory standing or operational solvency of third-party off-chain entities.Smart Contract & Bridge Risk
Cross-chain infrastructure introduces technical complexity. Lock & Mint logic: System security relies on bridge contracts — compromise could affect asset backing. Mitigations:- Audits by reputable security firms
- Bridge segregation to prevent contagion across different bridges
- Timelocks on governance upgrades allowing user withdrawals before changes take effect