Risk disclosures

Therm is experimental software. This page describes the ways it can fail you. It is not exhaustive, and nothing on this site is financial advice. If any of it is unclear, do not use the protocol until it is.

Base fee volatility#

Therm exists because the base fee on Robinhood Chain is volatile. That volatility cuts both ways.

For buyers, the locked rate is priced off the recent base fee, adjusted upward by the quote curve, plus a 3% premium. If the base fee stays calm for the whole time you hold therms, you will have paid more for gas than you would have at spot. Therm does not promise savings. It sells a fixed price, and a fixed price is only cheaper after the fact if the market moves against you.

For stakers, volatility is the risk you are paid to carry. The pricing model assumes spikes are short and that their average cost is less than the margin built into locked rates. Nothing guarantees that. A permanently busier chain after the subsidy ends, a change to how Robinhood Chain sets its base fee, or spikes arriving closer together than history suggests can make the pool's pricing wrong for long periods.

Pool insolvency#

The pool can run out of money. If losses exceed the reserve surplus and then the entire backstop, the pool cannot pay for all outstanding therms at the current base fee.

When that happens, the paymaster stops sponsoring. Your therms remain valid, but you cannot spend them until the pool is recapitalised, which may take a long time or never happen. There is no insurance fund behind the backstop and no obligation on anyone to recapitalise the pool. Therm holders are last in the loss waterfall, but they are in it.

Coverage ratio, shown live in the app, is the best indicator of how close the pool is to this state. Below 1.0×, the pool could not pay for every outstanding therm at the current base fee.

Smart contract risk#

Therm has not been audited. The contracts may contain bugs that allow funds to be stolen, frozen or mis-accounted. An audit reduces this risk but does not eliminate it, and Therm does not have one yet. See Security for status.

Therm also depends on contracts it does not control: the ERC-4337 EntryPoint, the USDG token, the DEX routers used for buy & burn, and the smart-account implementation your wallet uses. A failure in any of them can affect you.

Parameters and the sponsorship allowlist can be changed by a multisig behind a timelock. The timelock gives you time to react; it does not stop the change. Changes never re-price existing passes, but they can change which future transactions are sponsored.

Paymaster censorship and downtime#

Sponsorship depends on infrastructure outside the contracts: bundlers that include Therm user operations, a paymaster EntryPoint deposit that the pool keeps topped up, and a wallet that supports user operations.

Any of these can fail: bundlers go offline, the paymaster's deposit runs low during a sharp spike, the circuit breaker pauses sponsorship network-wide, or the allowlist excludes a contract you need. Your transaction is then not sponsored. If you hold ETH, your wallet can send it at the spot base fee; if not, you cannot transact until sponsorship resumes. Do not rely on therms as your only means of paying gas for time-critical transactions. Keep some ETH.

Dependency on Robinhood Chain#

Therm only works on Robinhood Chain and inherits every risk of that chain: sequencer downtime, reorganisations, bridge failures and changes to its operator's policies. If Robinhood Chain changes how its base fee is computed, introduces new subsidies, or alters gas accounting for L1 data, the economics behind Therm's pricing can change overnight. Therm has no control over, and no relationship with, the operator of Robinhood Chain.

No guaranteed yield#

Staking returns are not interest. They come from the spread, which can be negative, and from 30% of premiums, which depend on how many passes are sold. There is no fixed or minimum return. Past accruals, including anything shown in the simulator, say nothing about future returns. Staked capital is first-loss and may be lost in full in a single event; see the scenarios in Staking $THRM.

Token and liquidity risk#

Therms cannot be redeemed; their only guaranteed use is gas through the Therm paymaster. Any secondary market for therms or THRM may be thin or non-existent. Backstop liquidations sell THRM into the market and can depress its price at the moment stakers are taking losses.

Regulatory risk#

The legal treatment of prepaid gas credits, staking and governance tokens is unsettled and differs by jurisdiction. Laws may change in ways that restrict or prohibit use of the protocol. Therm is not available where prohibited, and it is your responsibility to know whether that includes where you are.