Risks
What are some of the risks?
Decentralized Finance
Decentralized Finance (DeFi) and products are uniquely designed. We encourage users to take the time to fully understand the mechanisms and specific risks associated with using DeFi applications.
Key Risks to Consider
Xamir.finance relies on smart contracts and code-based protocols to execute strategies. While these protocols are designed to be secure, there is always the risk of bugs, vulnerabilities, or exploits in the underlying code, potentially leading to loss of funds.
The DAO involves leveraging staked assets and other strategies across different DeFi protocols, market fluctuations can impact returns. For example, the value of assets held in Xamir.finance vaults can be affected by changes in the market, including price swings of staked assets like stETH or other tokens.
Xamir.finance utilizes leveraged strategies, particularly with stETH and other staked assets. While leverage can amplify returns, it also increases exposure to risks, including liquidation if the value of the collateral falls below required thresholds or if the borrowed assets cannot be repaid. Users should carefully consider the risks before participating in leveraged positions.
Managing Risks: Vault Automation and Rebalancing
The utilisation of multi-protocol approach (often referred to as "DeFi Legos") to maximize yield. Each protocol—such as AAVE, Euler, Compound, and Morpho—brings its own risks. A failure in any one of these protocols could impact the vault’s performance, with losses proportional to the assets held in that protocol. We recommend users review the risk profiles of each protocol to fully understand potential exposures.
Derivative Assets and Tokenized Stakes
Derivative Asset Risks (e.g., stETH)
Assets like stETH, a tokenized version of staked Ethereum, represent a derivative product that tracks Ethereum’s staking rewards. While stETH provides a convenient way to earn passive income through staking, it may be subject to liquidity risks, market fluctuations, and the performance of Ethereum’s Beacon Chain.
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