Risks

This article aims to clearly outline all of the risks that you should be aware of when using Delta One, but may not be fully comprehensive. See the website for more details.

New technologies can come with short-term benefits and costs connected with their development and investigation. Exploration provides both wonders and dangers in DeFi's case. Users, partners, team members, and community members should not overlook these.

Inherently to any protocol, we can see that there are several hazards: smart contract risks, economic exploits, hacks, unexpected occurrences (faulty logic in black swan situations), centralization, oracle, AMM performance, and composability. Some of them can be lessened, but it's unlikely that they'll all go away altogether. We're doing everything we can to mitigate each risk, and we want people to know that not only the Delta One protocol, but all DeFi protocols, are based on relatively experimental technology and are prone to failure (of various kinds), with no reimbursements in most cases.

We will outline some risks related to each type of vault on Delta One (staking and farming), but this does not cover all the possible risks related to smart contracts, or DeFi in general.

Staker Risks

By depositing into staking vaults, you are giving the smart contract a certain quantity of tokens. The smart contract is designed to return at least the same number of tokens back, but these tokens may have decreased in value since the initial deposit into the vault. By depositing into the stake vault, the user understands that they are fully responsible for any loss of value. Further, all APR and yield numbers are speculative, and no profit is guaranteed by the protocol.

At times when the stake pool is fully utilized by farmers, stakers will be unable to withdraw and thus forced to bear delta exposure until farmers divest their position or more stakers enter the market.

Another risk for running this strategy is that the automated market maker (which Delta Protocol smart contracts move your deposit into) may incur a smart contract risk or flash crash in which the prices of the tokens fluctuates in an unpredictable way causing extreme changes in price that lead automated systems like Delta One to misbehave. By depositing into this vault, the user understands and agrees to the strategies the smart contract will invest their underlying asset into. Delta has been architected in a way to avoid these risks, but they still might come up.

Further, Delta Protocol smart contracts have not been professionally audited. Smart contracts can be hacked, manipulated, and not function as expected. In such circumstances, the user may incur a partial or complete loss of the funds deposited. Users are advised to exercise caution and only risk funds they can afford to lose.

Farmer Risks

By depositing USDC into a farming vault, you are automatically borrowing an equal value of ALT from the Delta ALT Staking Pool, at a rate roughly equal to the current price of the ALT denoted on the vault page. The vault's smart contract is designed to automatically invest these equal values of ALT and USDC into Raydium's ALT-USDC yield farm, and then stake those LP tokens into a farm. While the Raydium pools will accrue transaction fees that provide yield to the farmers, the pool may become imbalanced; when the user withdraws their investment, the vault's smart contract may need to use the user's funds to buy additional ALT to repay the lent amount (plus interest), which can result in a net loss from the initial deposit. By depositing into this vault, the user understands that they are fully responsible for any loss of value. Further, all APR and yield numbers are speculative, and no profit is guaranteed by the protocol.

Another risk for running this strategy is that the automated market maker (in this case, Raydium, which the vault's smart contracts automatically move your deposit into) may incur a smart contract risk or flash crash in which the prices of the tokens fluctuates in an unpredictable way causing extreme changes in price that lead automated systems like the vault's smart contracts to misbehave. By depositing into these smart contracts, the user understands and agrees to the strategies it will invest their underlying asset into.

Further, the smart contracts that this interface is connected to have not been professionally audited. Smart contracts can be hacked, manipulated, and not function as expected. In such circumstances, the user may incur a partial or complete loss of the funds deposited. Users are advised to exercise caution and only risk funds they can afford to lose.

There is also risk of liquidations, in which there is a liquidation fee of 10%.