> For the complete documentation index, see [llms.txt](https://docs.hermetica.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.hermetica.fi/hbtc/risk-disclosures/counterparty-risk.md).

# Counterparty Risk

hBTC relies on **external protocols and infrastructure outside the control of Hermetica**. These counterparties are critical to strategy execution and asset movement and introduce risks that may affect protocol performance or asset availability.

{% hint style="info" %}
While Hermetica conducts technical diligence and ongoing monitoring of counterparties, reliance on external protocols inherently exposes the system to risks beyond Hermetica’s direct control.
{% endhint %}

#### Zest Protocol

hBTC integrates with the **Zest Protocol** to access money market infrastructure for **collateralized lending against sBTC**.

Risks associated with reliance on Zest include:

* **Protocol risk:** Vulnerabilities, design flaws, or economic failures within Zest could result in loss of funds, impaired liquidity, or forced position unwinds.
* **Liquidation and oracle risk:** Adverse price movements, oracle failures, or parameter changes may increase liquidation risk or affect borrowing conditions.
* **Governance and upgrade risk:** Changes to Zest’s contracts, risk parameters, or governance decisions may impact hBTC strategy execution.
* **Operational dependency:** Downtime, degraded performance, or paused functionality could disrupt protocol operations.

The Zest Protocol is governed independently and introduces risks that are external to Hermetica.

Additional information on Zest is available at:

* **Website:** <https://zestprotocol.com>
* **Documentation:** <https://docs.zestprotocol.com>

#### sBTC Decentralized Bridge

hBTC also depends on the **sBTC decentralized bridge** to enable the movement of Bitcoin between Bitcoin L1 and the Stacks ecosystem.

Risks associated with the sBTC bridge include:

* **Bridge security risk:** Failures, vulnerabilities, or signer coordination issues could impair minting or redemption of sBTC.
* **Cross-chain dependency:** Delays or disruptions in Bitcoin or Stacks network operations may affect bridge functionality.
* **Governance and operational risk:** Changes to bridge parameters, signer sets, or operational processes may impact availability or performance.

The sBTC bridge is governed independently and introduces risks that are external to Hermetica.

Additional information on sBTC is available at:

* **Website:** [https://www.stacks.co/sbtc](https://www.stacks.co/sbtc?utm_source=chatgpt.com)
* **Documentation:** [https://docs.stacks.co/learn/sbtc](https://docs.stacks.co/learn/sbtc?utm_source=chatgpt.com)


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