The outsized yields one can earn in DeFi (compared to TradFi) don’t come without risks. There are multiple, layered risk factors that you should be aware of before investing in any DeFi protocol.
There several factors that can lead to loss of funds that are not covered by audits and / or are out of the team's control.
We rely on automated bots to monitor asset prices and rebalance the strategies as needed. These bots may malfunction. If this happens the strategies may lose money and/or loans may get liquidated.
We are continuously monitoring the bots and improving their robustness.
When bridged assets are used for the underlying strategies, the assets may loose all of their value if the bridge is exploited. For example, the Moonriver valt is using Multichain-bridged USDC, so it is exposed to Multichain bridge issues.
Stable-coin vaults carry loan liquidation risk if the price of the volatile asset rises very quickly and our bots fail to rebalance the position in time. As an added layer of protection against this scenario, all strategies have a public `rebalanceLoan` method that anyone can call to prevent an impending loan liquidation.
We are alos taking advantage of the Gelato Network – a decentralized network of bots that will monitor the strategy’s loan health and trigger the emergency rebalance method if the position gets close to liquidation.
Our current strategies use lending protocols (usually forks of Compound or Aave) and forks of Uniswap V2. All positions are exposed to the risks, exploits, or failures of these underlying protocols.
It’s possible that a large-scale systemic failure of the crypto markets can occur, such as a major coin going off the peg. This can lead to the failure of multiple DeFi protocols and a significant loss of funds.