What can go wrong
A structured register of failure modes in digital assets — the mechanism behind each, the evidence you can actually look at, and where a well-documented precedent exists.
Counterparty
Customer assets are pooled and reused, lent, posted as collateral, or traded, so the same units back more than one obligation at once.
Evidence: Read the custody and yield terms for language granting the venue the right to use, lend, or pledge assets. Ask whether balances are held in named or omnibus wallets and whether any regulator requires segregation for that entity. On-chain, look for regular…
One custodian, one signing arrangement, or one operations team stands between holders and their assets, so a single failure can be terminal.
Evidence: Establish who can sign, in what quorum, under what recovery procedure, and whether any independent party has tested the key ceremony and the disaster recovery plan. Check whether the custodian is a regulated trust company or similar, what its financial…
A venue holding customer assets fails, and the balance shown in the account becomes a claim in a bankruptcy rather than an asset the customer controls.
Evidence: Read the terms of service on title, segregation, and what happens in insolvency, since the language is usually explicit once found. Check whether the venue publishes proof of reserves, whether that exercise includes liabilities, and who performed it.…
Self-custody puts the holder in charge of a secret that cannot be reset, so losing it or destroying the only backup is permanent.
Evidence: On-chain dormancy metrics show how much supply has not moved in many years, part of which is generally understood to be permanently inaccessible. For an individual arrangement, the testable facts are whether a restore has actually been performed from the…
Attackers take assets by persuading holders to sign a transaction or reveal a secret, without breaking any cryptography or contract.
Evidence: Review outstanding token approvals with an allowance viewer, since standing approvals are the main mechanism and are visible on-chain. Check whether the wallet decodes calldata into a plain-language action and whether the project pins its front end to a…
A large share of stake is operated by a few providers or on shared infrastructure, so one mistake can cause correlated penalties or systematic censorship.
Evidence: Look at stake share by operator, by liquid staking protocol, and by client software, and at the share of blocks produced through the largest relays and builders. Check the cloud provider and geographic distribution disclosed by large operators, and whether a…
A token representing an asset held elsewhere is only as good as the entity or contract holding the underlying and honoring redemption.
Evidence: Identify who holds the underlying, whether the reserve addresses are published and verifiable on-chain, and who is permitted to redeem at par and on what terms. Compare the wrapper's historical price against the underlying, since past deviation is the…