# Risks & Disclaimers

💀 **Use at your own risk. Do not deploy more capital than you are willing to lose.**

### **Smart contract risk**

The initial smart contracts developed by Kelp have undergone thorough audits by reputable security firms. Nonetheless, it's crucial to acknowledge that despite these formal audits, the presence of logic errors remains a possibility, potentially resulting in financial losses. Although we have implemented extensive precautions to safeguard the integrity of our smart contracts, users are advised to exercise caution and understand the associated risks. BPM Finance **explicitly disclaims any responsibility for financial losses, irrespective of culpability.**

### **Third-party platform risk**

We operates atop EigenLayer, assuming considerable smart contract risk from its code and the supported collateral assets. We opt to collaborate with platforms managing substantial assets, ranging from tens to hundreds of millions of dollars, and have taken reasonable measures to secure their protocols. Nevertheless, there exists the possibility that the underlying third-party platforms may deviate from their intended functionality, and any malfunction in their strategies could result in potential financial losses for LRT holders.

### **Collateral risks**

It's crucial to grasp that the strength of LRTs directly correlates with the collateral supporting it. Any depreciation in the value of the underlying LST will result in a commensurate decline in the value of of the LRTs. bpETH is structured as a composite of LST, without a guarantee regarding the specific LST constituting its backing or their respective values.

Moreover, it's essential to recognize that each supported LST introduces significant counterparty risk, potentially granting issuers the authority to freeze funds within their holders' wallets.

In the event that any of the node operators backing the LST supporting bpETH face slashing, it's foreseeable that bpETH holders will incur losses accordingly. For minor slashings observed thus far, bpETH holders may experience slightly reduced yields. However, in the case of a major slashing, bpETH's value is likely to decline proportionally to the percentage of the affected backing LST.

### **Slashing Risk**

In Ethereum's Proof-of-Stake system, validators pledge ETH as collateral to participate in validating transactions and generating new blocks, a process known as "staking."

"Slashing" refers to the penalty of confiscating some or all of a validator's staked ETH. This penalty occurs if a validator violates rules or acts negligently. Instances of slashing include:

1. **Double signing:** Attempting to validate two conflicting versions of truth.
2. **Liveness faults:** Failing to remain online and active as required.
3. **Safety faults:** Engaging in actions jeopardizing the network's security.

Slashing serves two primary purposes:

1. It deters dishonest behavior by causing validators to incur financial losses if they breach regulations.
2. It fosters network dependability by penalizing negligent actions.

In essence, slashing ensures validators have a financial incentive to perform their duties accurately, thereby bolstering the security of the Ethereum network. AVSs operating within EigenLayer are also subject to slashing conditions, potentially resulting in users experiencing losses at both the LST and Restaking levels, affecting their funds.

### **Risk mitigation**

Although it's not feasible to ensure absolute safety in our contracts, we've undertaken every conceivable measure to minimize the risk of fund loss. This includes deploying battle-tested contracts, conducting comprehensive internal audits, and seeking input from esteemed security professionals within the industry.
