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Risks

Using DeFi exposes you to risk and you should only put in money you’re able to lose.

In using Float you’ll experience certain risks. Here’s a non-exhaustive list to help you understand the many risks you expose yourself to if you choose to interact with the Float smart contracts.

Please also familiarse yourself with both of these risk articles we've written that apply: Apeing in reponsibly and Managing risk in float alpha

Your position may not move as you expect#

In addition to the movement of underlying asset prices, positions opened in Float can be affected by multiple factors.

Exposure shifts#

We use novel value transfer mechanisms to remove the need for liquidations. In the case of our floating exposure mechanism, the tradeoff made is that positions receive less exposure when their side of the market is overbalanced. Exposure below 100% can result in outcomes different from what could be expected based on market conditions.

To learn more see our floating exposure page.

Volatility decay#

Leveraged positions and even 1x leveraged shorts are subject to a phenomenon called volatility decay, which can cause deviations between actual portfolio performance and expected performance. Volatility decay becomes more pronounced with increased leverage, longer trade durations and other factors.

To learn more see our volatility decay page.

Multichain risk#

The Float Alpha is live on multiple EVM compatible blockchains. Events which affect these blockchains could cause users to lose some or all of their funds in unexpected ways. To understand these risks better, read the documentation prepared by the teams that administer these blockchains.

Composability risk#

Float deposits the funds used to mint market tokens into yield providing protocols. We only integrate with trustworthy, well known protocols and audited, secure smart contracts, such as Aave. However, this exposes our users to the risks associated with these protocols resulting in loss of user funds. Yield integrations are shown on the UI for each of our markets. To learn more about the risks associated with each integration please consult the docs of the integrated protocol.

Stablecoin risk#

All positions in Float are minted with DAI. We use DAI because it is the stablecoin which best balances security, decentralisation and liquidity. However, issues which would affect DAI and Maker DAO could affect user funds.

Smart contract risk#

Float puts the security of our users above anything else and we follow the highest standards for auditing our smart contracts before deploying. However, as with any DeFi protocol, we cannot guarantee that our contracts contain no exploits or vulnerabilities which could lead to loss of user funds.