Risks

Bythos lends against thin, young tokens. That carries real risk for borrowers and lenders. This page lists the main ones plainly, including the ones that are there by design.

Thin books mean low limits, by design

Your limit is 70% of the applied Depth Value of your collateral, and Depth Value stops at 15% below the best bid. On a thin pool that is not much. In the example pool used across these docs, 1,000,000 tokens against 100 HYPE, Depth Value stops growing after about 84,907 tokens: a holder of 500,000 tokens gets a limit of about 5.46 HYPE against a spot value of 50 HYPE.

This is not a bug. A protocol that lent more would be lending against HYPE the market cannot pay. If you need a higher limit, the token needs more depth.

The same logic cuts the other way. If liquidity leaves a pool, Depth Value falls with it, and health falls in the same block. A Line that was safe can become trawlable without any change in the token's quoted price.

Liquidation risk for borrowers

• Health uses the live sounding, so it reacts to a drop in depth at once. There is no grace period.
• If a pool cannot be read, live value is 0 and the Line can be trawled.
• A Trawl costs a 5% penalty on the debt: 3% to the keeper and 2% to the protocol.
• Interest accrues per second. At high utilization the borrow rate rises steeply, from 12.0% APR at 80% utilization to 60.0% APR at 100%, which pushes health down faster.

Borrowing below your full limit is the simplest protection. See Lines.

Bad debt risk for lenders

If selling all of a Line's collateral does not cover the debt, the shortfall is taken from that Market's Abyss Reserve. Whatever the reserve cannot cover is written off across that Market's lenders. A young Market may have a small reserve. Isolation limits the damage to one Market, but inside that Market, lenders carry it. See Abyss Reserve.

Withdrawal risk for lenders

Lenders can only withdraw idle HYPE. If most of a Market's HYPE is borrowed, a withdrawal may have to wait until borrowers repay or Lines are trawled. The rate curve above 80% utilization is built to bring HYPE back, but it does not guarantee timing.

Precompile timing

Phase 1 depends on the EL1Read and EL1Write precompiles, planned in the ArbOS upgrade about 4 weeks after Elysium mainnet on Nov 9, 2026. That timing is set by Elysium. If the upgrade is delayed or changes, Bythos stays in Phase 0 · pool sounding: limits reflect pool depth only, and Trawl sells through pools, not HyperCore intents. A precompile that behaves differently from its specification would also need review before Phase 1. See Phases and roadmap.

Keeper availability

A Trawl only happens if someone calls it. Anyone can, and each call pays 3% of the debt as a keeper bonus, but nothing forces a keeper to act. If keepers are offline, slow or find a Line too small to be worth the gas, an unhealthy Line can sit unliquidated while its collateral keeps losing value. That raises the chance of bad debt. Keepers can run through the Ichor paymaster, and the app and keepers both call record() to keep soundings fresh, but neither removes the dependency.

Sounding also depends on records. record() can run at most once per token every 30 s. If nobody records for a while, the 15-minute window holds fewer snapshots, and a new Market cannot be borrowed against at all until its oldest snapshot is 30 minutes old.

Smart-contract risk

Bythos is a set of smart contracts: Market, MarketFactory, SoundingV0, Trawl, AbyssReserve, Treasury and supporting contracts. Contracts can contain bugs. A bug in Sounding could misprice collateral; a bug in a Market or in Trawl could lock or lose funds. The anti-manipulation rules reduce oracle risk, but they cannot protect against errors in the code that enforces them. Only deposit what you can afford to lose. The source is in the repository at packages/contracts/src. See Contracts.

Manipulation that the rules do not stop

The three rules make pumps expensive and short-lived; they do not make them impossible. An attacker who holds a pumped price for 15 minutes can raise their limit by a fraction of the pump, as shown in Anti-manipulation. The Line then becomes trawlable as soon as the price returns, so lenders are protected by Trawl, which brings keeper availability back into play.

Testnet reset

Testnet state can be reset at any time. Lines, supplied HYPE, Markets, balances and addresses can disappear without notice. Testnet tokens, including tBYTHOS and the demo tokens DEEP, MID and THIN, have no value.

Token risk

Until it launches on Montra at Elysium mainnet, any token presented as $BYTHOS did not come from this protocol.