Risks and Considerations

Here's what you should know before you add money.

unflat is a technology platform and is not a bank or a financial intermediary. Funds deposited through unflat are not covered by deposit guarantee schemes (FITD or equivalent) and are subject to risk, including loss of principal. Never deposit money you cannot afford to lose.

Smart contract risk

All DeFi protocols, including Morpho, rely on smart contracts, code that executes automatically on the blockchain. Morpho publishes the audits of its contracts, and Sherlock reviewed the unflat app's code in July 2026, but bugs or undiscovered vulnerabilities could still lead to a loss of funds. An audit lowers the chance of a bug; it does not rule one out.

Lending risk

If collateral falls faster than liquidations can keep up, or a price feed (oracle) fails, a loan can leave bad debt, and the loss falls on lenders. The vaults' curators, today Steakhouse Financial and Gauntlet, choose the markets each vault lends to: a wrong choice can cause losses.

Stablecoin de-peg risk

USDC is designed to be worth one US dollar, backed by reserves that Circle publishes. But stablecoins can lose their peg: USDC did briefly in March 2023, when Circle had part of its reserves at Silicon Valley Bank.

A de-peg would directly affect the value of your money, and optional cover does not cover it.

FX risk (for EUR-based users)

Your money on unflat is held in USDC, a dollar stablecoin, so its value in euros moves with the exchange rate:

• If the dollar weakens against the euro, your money is worth fewer euros

• If the dollar strengthens, it is worth more euros

Liquidity risk

Under extreme market conditions, nearly all the money in a lending market can be lent out. Morpho's documentation notes that this can stop lenders from withdrawing from that market for a while, until borrowers repay or new deposits arrive. There is no lock-up on unflat, but a withdrawal depends on that liquidity.

Regulatory risk

The rules for DeFi and stablecoins in Europe are evolving. MiCA (Markets in Crypto-Assets) has applied in full across the EU since December 2024, and future changes could affect:

• How unflat operates

• The availability of certain stablecoins

• Reporting requirements

• Tax treatment of DeFi yields, which depends on your country

Variable rates

The rate is not fixed. The lending market sets it, not unflat:

• High borrowing demand → the rate goes up

• Low borrowing demand → the rate goes down

• Large supply of lenders → the rate goes down

No return is guaranteed. Past rates do not predict future ones.

Counterparty risk

unflat never holds your money, but using it means relying on third parties: Privy for the wallet, MoonPay and Coinbase for card and bank payments, Morpho and the curators for the vaults, Circle for USDC, the Base network, and OpenCover · Nexus Mutual if you turn on cover. A problem at any of them can affect your money or your access to it. unflat can't recover your wallet: you can export your recovery key in Settings › Security.

Key reminders:

• unflat is not a bank, and your money is not covered by deposit guarantee schemes

• Never deposit money you cannot afford to lose

• Past rates do not predict future ones

• The rate is variable and can go down

• Your money is held in USDC, so its value in euros moves with the exchange rate

• Consult a financial advisor if you're unsure whether this is right for your situation

What you can check yourself

We can't eliminate risk, but we can be transparent about it:

• Deposits, yield and cover are public on the Base blockchain

• MoonPay and Coinbase fees are shown before you confirm; unflat charges no fees

• The app lists what cover includes and excludes under "How coverage works"