Risks & Mitigants

USD.AI is a balance between risk mitigation in the pursuit of yield capture. By orienting risk mitigation towards asset productivity, USD.AI will facilitate growth by focusing on the asset underwriting process.

Risk Category	Mitigant	Details
ECONOMIC	Equity Buffer	70-80% Loan-to-Value (LTV) ratio provides a safety margin against asset value fluctuations and default risks.
ECONOMIC	Debt Service Reserve Account	~3 months of peak debt service held in a restricted cash account (or in USDai directly) to cover potential ramp up delays, cash flow lumpiness of borrower. Structural protection to ensure borrower maintains healthy cash reserves
ECONOMIC	Amortization	Regular principal repayment schedule reduces exposure over time, with first successful implementation complete.
ECONOMIC	Queue Extractable Value	A market-based pricing mechanism for liquidity bottlenecks for each amortization loan repayment.
ECONOMIC	Value Insurance	Value insurance policy placed to provide insurance coverage over the life of the loan. In the event of default, GPUs are sold in the secondary market, if sale price is under the insured amount, insurer pays out the delta.
LEGAL	Bankruptcy Remote SPV	Clear legal structure secures asset ownership and collateral rights throughout the financing period, assets and contractual revenue split from parent corporate balance sheet prevents other creditors from attempting to claim rights to assets in event of default.
LEGAL	Onboarding Diligence	Thorough vetting of counterparties' financial status and compliance requirements before participation.
LEGAL	Software Oversight	Ongoing software oversight into machine usage, uptime and location
MODULAR	Underwriting Process	Comprehensive system including asset appraisal, default handling, and flexible amortization options.
MODULAR	Risk Incentive	Interest rates range based on cash flow qualities (ie, on demand rentals charged higher rate than contractual multi year offtake agreements). Higher yield compensates underwriter economic interests, which align with platform success.
MODULAR	Controls	Built-in safeguards include auction repurchase guarantees and robust appraisal systems.
TOKENOMIC	Governance Whitelist	Community oversight of loan terms and asset selection promotes long-term sustainability.
TOKENOMIC	Last line of defense	Token functions as ultimate risk buffer in case of major depeg, similar to Aave and Maker models.