Risk Factors & Disclaimers

17 June 2024

Scope and Purpose of ZKsync Governance Procedures

The ZKsync Governance Procedures aim to make certain disclaimers, disclosures, and other risk-oriented information which relate to governance and the governance processes involved in the ZKsync protocol (the ZKsync blockchain network and ZKsync governance system are collectively referred to herein as the “ZKsync Protocol”). The ZKsync Governance Procedures are intended to disclaim any legal obligations of ZKsync Protocol participants to one another and to any third parties and to serve as a guide to a range of potential risks, uncertainties, and adverse/negative facts that may be associated with the ZKsync Protocol or its use or results of operation. It is highly recommended that you carefully study the ZKsync Governance Procedures including, but not limited to the related smart contracts, code and onchain mechanisms before directly or indirectly using the ZKsync Protocol, the ZK token, engaging in any ZKsync governance system or otherwise engaging in any other activities directly or indirectly related to the ZKsync ecosystem.

The ZKsync Governance Procedures are intended to function as a high-level and readily-understandable description of the governance and the governance processes involved in the ZKsync Protocol. However, they are incomplete because they relate and refer to smart contracts, code and onchain mechanisms that operate deterministically in accordance with their specifications. As such, the ZKsync Governance Procedures must only be read in conjunction with a thorough understanding of those smart contracts, code and onchain mechanisms. If you are unable to understand or read smart contracts, code and onchain mechanisms you should take advice from a person (legal and natural persons are collectively referred to as “Persons”) that can. As such, the ZKsync Governance Procedures are not in themselves and are not intended to be a comprehensive account of all relevant risks, uncertainties, adverse/negative facts and disclaimers relating to the governance and the governance processes involved in the ZKsync Protocol.

The Governance Parties

Decisions made by any Person referred to in the ZKsync Governance Procedures (collectively, “Governance Parties”) are made at the sole discretion of the applicable Governance Party. Unless explicitly agreed to in writing by a Governance Party, no Governance Party shall have express or implied duties to any Person, or be liable under any circumstance, for decisions made in good faith in connection with their roles contemplated by or made pursuant to the ZKsync Governance Procedures.

The ZKsync Governance Procedures

The ZKsync Governance Procedures are intended to be for descriptive, disclosure and informational purposes only and nothing contained herein shall be construed as creating any agency, partnership, joint venture or other form of joint enterprise, employment, or fiduciary relationship between or among any Governance Party and any other Person. No Person, by virtue of the ZKsync Governance Procedures, will have any right, power, or authority to act or create an obligation, express or implied, on behalf of another party. Nothing herein shall be deemed or constructed as creating a business opportunity relationship.

No Governance Party is a party to the ZKsync Governance Procedures and no Governance Party makes any guarantee of potential earnings that will, or may, be received in connection with activities relating to the ZKsync Protocol, and has not provided anyone with any statements relating thereto.

Limitations on Liability

The ZKsync Protocol and all other relevant technologies related to the ZKsync Protocol are being provided on an as-is basis, without representation, warranty, insurance or indemnity, and any and all participation is solely at your own risk.

No Governance Party or any other Person has made or makes any other express or implied representation or warranty, either written or oral, including any representation or warranty as to the accuracy or completeness of any information provided in the ZKsync Governance Procedures or as to the future success of the ZKsync Protocol or any representation or warranty arising from statute or otherwise in law.

IN NO EVENT SHALL ANY GOVERNANCE PARTY OR ANY OF ITS AFFILIATES, OWNERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES BE LIABLE TO ANY PERSON FOR CLAIMS OR DAMAGES OF ANY KIND WHATSOEVER, INCLUDING CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR ENHANCED DAMAGES, LOST PROFITS OR REVENUES, OR DIMINUTION IN VALUE ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH ANY ACTION TAKEN OR NOT TAKEN IN RELATION TO THESE ZKSYNC GOVERNANCE PROCEDURES AND THE ACTIVITIES CONTEMPLATED THEREBY, REGARDLESS OF (A) WHETHER SUCH DAMAGES WERE FORESEEABLE, (B) WHETHER OR NOT A PERSON WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND (C) THE LEGAL OR EQUITABLE THEORY (CONTRACT, TORT, OR OTHERWISE) UPON WHICH THE CLAIM IS BASED.

No action or inaction on the part of any Governance Party described in these ZKsync Governance Procedures will entitle any other Person to equitable relief, including specific performance, injunctive relief, rescission, or any other form of equitable remedy.

Irreversibility of Transactions and Lack of Remedies and Insurance for Damages

Blockchain transactions are, under normal conditions, irreversible. Any tokens, including any ZK tokens, that you deposit into ZKsync-related smart contracts are subject to potential risk of permanent disablement, impairment, loss or forfeiture in the event of any exploits, bugs or malfunctions of the relevant smart contracts or the underlying blockchain itself (including both ZKsync and Ethereum), and no remedy will be available from any Person due to any normal or direct damages, indirect, special, incidental, consequential or punitive damages or losses of any character, including damages for loss of goodwill, lost profits, lost sales or business you may suffer in connection with your participation in the ZKsync Protocol and all other relevant technologies related to the ZKsync Protocol or use of any related technologies.

Experimental Technology; Technical Risks; Independent Due Diligence Required

The technologies and assets involved in the ZKsync Protocol are highly experimental and risky, have uncertain and potentially volatile value (if any), and should be directly evaluated by experts in blockchain technologies before use. Use them solely at your own risk. You must not rely on the ZKsync Governance Procedures, any articles, blogs, social media posts, summaries or published code audits as an accurate description or evaluation of the ZKsync Protocol or any other blockchain, or for purposes of making any financial, governance, voting or other decision. Instead, you must only participate in the ZKsync Protocol after thoroughly reviewing and understanding the related smart contracts, code and onchain mechanisms that operate deterministically in accordance with their specifications, in accordance with your own independent due diligence process (which should be supplemented by professional advice, where you are unable to or do not have the required skills to form your own independent opinion).

Multisignature Controls Over the ZKsync Protocol

Certain elements of the ZKsync Protocol can be modified or controlled by certain cryptographic multisignature smart contracts stored on their respective blockchains (each, a “Multisig”). Each Multisig, in turn, is administered by Persons who each hold one or more private keys, a subset of which may (by signing their respective private keys to the same transaction and broadcasting that transaction to blockchain validators or sequencers) instruct validators or sequencers to perform Multisig operations. It is possible for the Multisig key holders, through the Multisig, to change certain parameters of the ZKsync smart contracts or other ZKsync-related technologies. This discretion of the Multisig key holders constitutes a material risk, and could enable your tokens, including but not limited to any ZK tokens, to be adversely affected, impacted, lost, damaged, destroyed, diluted, modified, used in unexpected ways, subjected to unexpected risks, or misappropriated.

ZKsync Multisig Key Holders

The Multisig keyholders of the ZKsync Security Council Foundation are expected to be independent service providers of the ZKsync Security Council Foundation. These keyholders are expected to execute a Multisignature Participation Agreement and a service level agreement with the ZKsync Security Council Foundation providing, among other things, that they will use their signature authority in their independent judgment to foster ZKsync as a public good which is available for ZKsync users and others in the ZKsync community. The Multisignature Participation Agreement and a service level agreement are expected to contain legal constraints on the authority of the Multisig keyholders to use their signature authority to change the ZKsync Protocol to enhance the overall security of those systems.

The Multisig keyholders of the ZKsync Guardians Foundation are expected to be directors of the ZKsync Guardians Foundation. These keyholders are expected to execute a Multisignature Participation Agreement with the ZKsync Guardians Foundation providing, among other things, that they will use their signature authority in their independent judgment to foster ZKsync as a public good which is available for ZKsync users and others in the ZKsync community. The Multisignature Participation Agreement is expected to contain legal constraints on the authority of the Multisig keyholders to use their signature authority to change the ZKsync Protocol.

However, the existence of a Multisignature Participation Agreement and / or the relevant bylaws of the relevant entity do not guarantee that the Multisig key holders will comply with their terms, and, due to the nature of private/public- key cryptography, ZKsync and other relevant technologies, the ability and willingness of the ZKsync Security Council Foundation or the ZKsync Guardians Foundation to timely and effectively enforce the terms of the Multisignature Participation Agreement and or the relevant bylaws against the Multisig key holders, and other factors, the Multisig key holders’ performance of their obligations under the Multisig Participation Agreement and or the bylaws cannot be guaranteed and is subject to numerous risks and uncertainties. By using the ZKsync Protocol you agree to assume all risks arising from the existence and operation of each Multisig

Other ZKsync-Related Multisigs

Systems not constituting a part of the ZKsync Protocol, but used in the functioning of the ZKsync Protocol within the ZKsync ecosystem, may also be subject to control by Multisigs, or even by single administrative accounts. Such systems may include bridges, vaults, bots, oracles and other blockchain systems on which the foregoing are deployed, and other relevant technologies. Any mutability of such systems through their respective Multisigs or other control accounts may adversely affect the functioning of the ZKsync protocol including but not limited to the ZKsync ecosystem and/or the ZKsync governance system. Please be aware of all such dependencies and review their applicable code and documentation to understand these risks.

Risks of No Promised Efforts or Resources

The ZKsync Protocol is intended to be community-governed. After the public launch of the ZKsync Protocol, none of the Persons who created all or any part of the ZKsync Protocol smart contract system should be expected to have a material ongoing role in ZKsync research, development or promotion. Certain relevant parties may elect to undertake limited ministerial activities directly or indirectly related to ZKsync, such as maintaining availability of a ZKsync related web interface, but no promise, guarantee or assurance of such ministerial efforts or any other efforts is being made, and any such efforts which do occur may be abandoned at any time, with or without advanced notice. There is no ‘ZKsync enterprise’, ‘ZKsync company’ or ‘ZKsync business’. The ZKsync Protocol is comprised of multiple different inter-related technologies, systems and smart contracts and from time to time will be used, interacted with or otherwise referred to by a diverse range of participants each of whom will have different interests, whether economic, technical, social or otherwise. Many such interests will be in direct conflict and as such, you acknowledge that there cannot be a direct collective benefit or adverse effect of participants interacting with the ZKsync Protocol.

No Person has promised you, or assumed any obligation to you to exert or provide financial, technical, social or other support for, any efforts, capital or resources in connection with the ZKsync Protocol. No Person has promised you, or assumed any obligation to you to exert or provide financial, technical, social or other support for, any research, development, promotion, marketing, maintenance, monitoring, or improvements relating to the ZKsync Protocol. Any past, present or future efforts on the part of any Person are being conducted on a voluntary and not committed basis, and are not intended as, and must not be construed or relied upon as, a promise of continuing efforts. Any past, present or future efforts on the part of any Person may not have the intended outcome, and the willingness or ability of any particular Person to influence or otherwise change the ZKsync Protocol.

Risks of Decentralized Governance

Updates, changes or amendments to the ZKsync Protocol may require approval of the Token Assembly, which consists of a dispersed group of ZK token holders that may be unable or unwilling to sufficiently coordinate to produce action or inaction.

Risks of Builder ZK Token Allocations

Certain Persons who contributed to the research and development of the ZKsync Protocol have received 16.1% of the ZK token supply, subject to lockup. Further details can be found at: https://blog.zknation.io/zk-token/.

No such Person has made any representation, promise, guarantee or assurance to you that any ZK token granted to any such Person, or any funding or resources of any such Person, will be held, used or spent for the benefit of the ZKsync Protocol and any such Person may interact with their ZK token at their sole discretion, subject to any contractual restrictions on such.

Any sale or other transfer or distribution of such ZK tokens could occur without warning. Any such transaction would increase the circulating supply of ZK tokens. Depending on the number of ZK tokens sold, transferred, or distributed, the terms of sale, transfer or distribution and the prevailing market conditions, such a sale, transfer or other distribution could have a material adverse effect on the price or value of, or demand for, ZK tokens.

While locked, the ZK tokens of builders will be votable. Any use of such ZK to vote in relation to the ZKsync Protocol could affect governance outcomes. No assurance can be made that any such ZK token recipients will participate in ZK governance. Any voting of such ZK tokens could fail to be conducted on a reasonable, good faith, diligent, or disinterested basis and may not be done in the best interests of other ZK token holders or the ZKsync protocol including but not limited to the ZKsync ecosystem and/or the ZKsync governance system or the ZKsync community. Any ZK token holder could have financial, social or other interests or incentives which could outweigh their respective interests and incentives (if any) relating to the ZKsync Protocol. No ZK token holder owes you fiduciary duties, duties of care or other legal duties which would preclude them from following such extrinsic interests to the detriment of your interests or the interests of the ZKsync Protocol.

ZK token holders who choose to participate in governance will be required to use their own personal independent discretion and decision-making in doing so, including the choice as to any delegation of their voting power to a delegate.

As a result of the foregoing factors and the lack of any Person or group of Persons able to control and manage the ZKsync Protocol, any discretionary decision-making related to such systems depends on the effectiveness of spontaneous group decision-making among participating ZK token holders. There may be disputes, differences of opinion, disagreements, conflicting incentives and a lack of coordination among or between any or all governance participants, and such circumstances may adversely affect governance results.

ZKsync Content; Informational Purposes Only

All publications, articles, blogs, Xeets, tweets, messages, posts, other online communications, videos, documents, statements, analyses and information relating to the ZKsync Protocol (collectively, “ZKsync Content”) are intended solely for general educational purposes regarding the code, smart contracts, software systems and other social or governance systems relating to the ZKsync Protocol and not as financial, legal, accounting, investment, tax or other advice or services, including any recommendation as to any action or inaction. Accessing or using the ZKsync Content does not create any fiduciary, service or other contractual or common law relationship between you and the Persons who produce or publish the ZKsync Content.

The ZKsync Content is not intended as and does not provide or create or constitute a part of any advice, representation, warranty, certification, guarantee, promise, offer, issuance, solicitation, undertaking, service, indemnity, insurance, partnership, joint venture, or enterprise, express or implied. The ZKsync Content is not and does not constitute a part of an offer or agreement to make any products or services available now or in the future, to maintain or update or improve any technologies or content, or to sell or buy or otherwise transact in any asset or enter into any transaction, including anything in relation to the ZKsync Protocol.

The ZKsync Content may be inaccurate, incomplete, out-of-date, or biased. The ZKsync Content may utilize incorrect data and assumptions, make incorrect predictions, or fail to account for material risks. The ZKsync Content was not prepared by fiduciaries, has not been assessed by independent third parties and may have been prepared by Persons with undisclosed material conflicts of interest.

All use of the ZKsync Content and the technologies described therein, including but not limited to the ZKsync Protocol. You must not rely on the ZKsync Content as a basis for making any financial, economic, social, voting or other decision but must instead conduct your own independent due diligence into all relevant matters or engage your own professional advisors to conduct such due diligence on your behalf.

No Governmental/Regulatory Review or Approval

The ZKsync Content and the matters described in the ZKsync Content have not been reviewed, approved, endorsed, opined on, licensed or registered by or with any regulator or other entity (including governmental agencies, commissions, and self-regulatory organizations), and the authors of the ZKsync Content are not licensed to provide any legal, financial, accounting, investment, broker, dealer, or other advice or services.

Uncertain Nature of Forward-Looking Statements; No Duty to Update.

Any forward-looking statements in the ZKsync Content are subject to numerous assumptions, risks and uncertainties, and thus the events described or predicted therein are subject to change or to fail to occur in accordance therewith. The authors of the ZKsync Content undertake no obligation to update, supplement or amend any statement that becomes inaccurate or incomplete after the date on which the ZKsync Content is first published, or to alert the public as to any such inaccuracy or incompleteness, whether such inaccuracy or incompleteness arises as a result of new information, changes in plans, unanticipated events or otherwise.

No Investment or Lending; No Contract Rights; Absence of Counterparties

Your transactions utilizing the ZKsync Protocol are not intended to be an investment, a capital-raising transaction for an enterprise, a sale of your tokens to any Person or group of Persons or a purchase of tokens from any Person or group of Persons. They are also not intended to be a loan, consignment or deposit of your tokens to or with, or a service provided to you by, any Person or group of Persons. Your deposited and/or locked tokens will not be owned by or under the control of any Person or group of Persons involved in creating the ZKsync Protocol. There is no private or governmental insurance (on the part of the creators of the ZKsync Protocol, any nation-state or any other Person) available to compensate you for any such losses or other adverse circumstances relating to ZKsync transactions or smart contract interactions.

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