Last Updated: September 1, 2026
This Risk Disclosure summarizes key risks of using the Daybreak protocol and interface (the "Services") and of acquiring, holding, or trading Partials. It supplements, and should be read together with, the Daybreak Terms of Service (including the Assumption of Risks section) and this list is not exhaustive. Capitalized terms have the meanings given in the Terms of Service.
Partials reference third-party tokenized equity tokens ("Underlying Tokens") issued by independent issuers ("Underlying Issuers"). Before acquiring Partials or Underlying Tokens, you should also read the applicable Underlying Issuer's own offering, terms, and risk documentation (for example, the base prospectus and final terms published by Backed Finance for xStocks, or the terms, risk disclosure statement, and trust documentation published by Backpack and Trek Nexus Markets for their tokenized equities), which are available from the applicable issuer and govern the Underlying Tokens themselves.
BY ACQUIRING PARTIALS, YOU CAN LOSE YOUR ENTIRE INVESTMENT. Partials are highly speculative, complex, and technology-dependent instruments that may not be suitable for inexperienced participants. You should not commit funds you cannot afford to lose, and you should seek advice from an independent and suitably qualified financial, legal, and tax advisor before deciding to participate. Daybreak does not provide investment advice, and nothing in the Services is a recommendation or solicitation to buy, sell, or hold any token.
Holders of Partials have no ownership in, and no claim against, any referenced company. Partials confer no equity, voting, dividend, distribution, information, or liquidation rights in the referenced company, any of its subsidiaries or business segments, or any Underlying Issuer. Referenced companies are not involved in, and do not sponsor, endorse, or support, the creation or trading of Partials, and may act without regard to the interests of Partial holders. A Partial's value corresponds to a market-determined weight of one Underlying Token by reference to a fixed business-scope definition; nothing requires or guarantees that a Partial's price will track the performance, value, or prospects of the business for which it is named.
Protocol redemption requires a complete set (one unit of every Partial in the series). An individual Partial carries no redemption right of its own; the only way to exit a single Partial is to sell it on a secondary market. Secondary-market liquidity is not guaranteed, may be thin or concentrated in a small number of pools, may be withdrawn or suspended at any time, and may be zero. You may be unable to sell a Partial at any price at the time you wish to.
A Partial's price reflects two variables at once: the price of the Underlying Token and the market's opinion of one business's weight within the whole company. These effects are multiplicative, so Partial prices can rise or fall far more sharply than the underlying stock, particularly for low-weight Partials. A Partial's weight can decline toward zero — including for reasons unrelated to the named business's actual performance, such as sentiment, trading flows, or repricing of other Partials in the same series — even while the referenced company itself performs well.
Underlying Tokens are not shares. They are tokenized instruments created by third-party Underlying Issuers under their own legal structures, and they carry the credit, solvency, operational, custody, and counterparty risks of those issuers and their depositary institutions — risks that exist irrespective of the referenced company's performance. An insolvency or failure of an Underlying Issuer or its custodians could delay or prevent access to the assets backing the Underlying Token and result in partial or total loss. The market price of an Underlying Token can deviate from the price of the actual referenced equity, including because tokens may trade continuously while the equity's home market is closed, so prices can gap or diverge outside exchange hours. Fees apply at multiple levels (issuer fees, protocol fees, pool spreads, network fees), so returns will not equal the return of directly holding the referenced equity over the same period. Dividends and corporate actions are handled by the Underlying Issuer under its own documentation (for example, through balance or multiplier adjustments); Daybreak passes these through mechanically and adds no entitlements of its own.
Underlying Tokens typically carry issuer-held administrative powers: the issuer can pause all transfers of the token, freeze individual accounts, transfer or seize tokens under a permanent delegate authority (for example, in response to legal or court orders), or activate transfer-restriction programs. Exercise of any of these powers can halt minting and redemption through the Daybreak protocol — including for Underlying Tokens held in protocol escrow — and is entirely outside Daybreak's control. Daybreak has no discretionary pause of its own over redemption; these issuer powers are the only events that can stop a redemption (and, if a transfer-restriction program is activated, a protocol safety check fails closed until a corresponding program upgrade is deployed).
The Daybreak protocol consists of smart contracts that execute autonomously on the Solana blockchain. Bugs, exploits, or unforeseen interactions in the protocol, the trading pools, or integrated software could result in loss of funds. Blockchain transactions are irreversible once finalized; they can also fail, be delayed, be re-ordered, or be affected by network congestion, outages, validator behavior, or MEV. During an initial pilot period, the Daybreak program is upgradeable by the Daybreak team behind a publicly disclosed timelock whose configuration cannot be shortened; a malicious or compromised upgrade could, after the timelock delay, modify any aspect of the program, up to and including the total loss of escrowed assets. Following the pilot period, the core program is intended to be made immutable, with governance limited to enumerated, capped parameters.
Secondary-market liquidity for Partials may be provided primarily or entirely by a market maker affiliated with Daybreak, which quotes at its own discretion, may widen spreads or withdraw quotes at any time, and trades for its own account. Convexia Labs, Inc. and its affiliates may hold Partials and Underlying Tokens, earn protocol fees on minting, and earn spreads in the pools; their interests may diverge from yours. The combined market price of a complete set can deviate from the value of the Underlying Token, and arbitrage that tends to close such deviations is performed, if at all, by independent third parties and is not guaranteed. Supplying your own liquidity to an individual Partial pool is unsupported and discouraged: single-pool liquidity provision is structurally exposed to basket-level order flow and can be persistently unprofitable.
Each series commits its business-scope definitions immutably at creation. If the referenced company reorganizes, divests, spins off a business, or changes its financial reporting, Partial definitions do not update: the market may reprice Partials, and the series' residual Partial absorbs definitional changes by construction. New series with updated definitions may be launched, but migration is voluntary (redeem the old series, mint the new), and holding a stale series is a risk you bear.