Risk disclosures

Depositing into the Kimp Pool makes you the counterparty to every trader on KIMP. This page lists the risks specific to that role. It is not exhaustive. Read it together with the protocol-wide Risks and the Legal notice. Nothing in these docs is investment advice.

Counterparty risk#

The pool takes the other side of net trader P&L. If traders are net long the premium and the premium rises, the pool pays them. Fees are designed to compensate LPs over time, but there is no guarantee that fee income exceeds trader profits in any week or over any period. kLP can lose value.

The kimchi premium can move quickly. Historically it has swung from strongly positive in retail euphoria to negative in panic. A regime change while the pool carries skew in one direction is the main source of LP loss. Caps limit the size of that exposure; they do not remove it. See Skew limits and OI caps.

Index risk#

Contracts mark and settle against the Kimp Index. LP outcomes depend on the index being correct.

• Reporters could publish incorrect values. The median, quorum, circuit guard, flagging and slashing reduce this risk. See Reporter set and Bonding and slashing.
• Source venues could halt, suspend an asset or print anomalous prices. See Edge cases.
• FX data can gap on weekends and holidays. The last valid mid is carried for up to 72 hours.
• A dispute can slash a reporter after the fact, but it does not reverse a settlement that has already occurred.

Collateral and asset risk#

• ETH price. ETH held by the pool is valued in USD. A fall in ETH reduces NAV independently of trader P&L.
• Bridged USDC. Bridged USDC depends on its issuer and on the bridge. A depeg or bridge failure reduces NAV.
• Trader collateral. Trader ETH is valued with a 10% haircut. A fast ETH move combined with a premium move can leave a position under-collateralized before it is liquidated. Any shortfall is absorbed by the pool.

Liquidity and withdrawal risk#

Withdrawals are instant only while pool utilization after the withdrawal stays at or below 80%. Above that, requests are queued until the next weekly settlement on Friday at 08:00 UTC. During that time your kLP remains exposed to the pool. If the chosen payout asset is short, you may receive the other asset at the same USD value. See LP token.

Smart contract risk#

The pool, markets and index are smart contracts. They may contain bugs despite testing and audits. Audits are scheduled before mainnet. Core contracts are non-upgradeable, which prevents a malicious upgrade but also means a bug cannot be patched in place. Fixes ship as new contracts and migration is decided by governance. See Audits and Admin keys and timelock.

Network risk#

KIMP runs on GIWA, an OP Stack Ethereum L2 with a single sequencer. Sequencer downtime, delayed batches or a reorganization of preconfirmed blocks can delay index updates, liquidations and withdrawals. Flashblocks preconfirmations are an early view of status, not finality. See Flashblocks usage.

Governance risk#

Caps, fees and sources change through $KIMP governance with a 48-hour timelock. A proposal could change parameters in a way you disagree with. The timelock gives time to withdraw, subject to the utilization rule above.

Regulatory risk#

Derivatives on a price spread may be restricted in some jurisdictions. Access may be limited. See Restricted persons.