Risks

Although we take a multitude of safety precautions and Vicuna Finance will be fully audited, farming and participating in web3 and DeFi comes with certain risks:

Impermanent Loss (IL): Impermanent loss in DeFi occurs when providing liquidity to a token pool, and it results from the temporary decline in the value of your assets compared to holding them. This happens due to changing token prices within the pool. The loss is "impermanent" because it can be recovered if you wait for the pool to rebalance.
Negative APY: In this situation, the borrowing interest rate surpasses your yield farming profits, causing your debt to increase faster than your equity value. If this persists, it may eventually lower your equity value to a point that triggers liquidation. Likely causes are: High borrowing pool utilization or a significant price drop in the rewards token (For example Dex Token X).
Liquidation: When you initiate a leveraged yield farming position, Vicuna Finance borrows a base asset on your behalf for farming purposes. However, there's a potential liquidation risk if the price of the borrowed asset rises in comparison to the farming token pair. Your position becomes susceptible to liquidation when the Debt Ratio (debt divided by position value) reaches a specific threshold known as the Liquidation Debt Ratio or Kill Threshold.
Smart Contract Risk: Despite undergoing third-party audits, it's essential to acknowledge the potential existence of vulnerabilities in our smart contracts. Additionally, there is a risk associated with third-party platforms, such as the AMMs we utilize, as they too may contain smart contract vulnerabilities.
Price impact when entering/Existing a position: If you attempt to initiate a sizable position in comparison to the pool's size and need to perform swaps, your transaction may result in a substantial price impact.

PreviousLiquidation NextAudit

Risks

Although we take a multitude of safety precautions and Vicuna Finance will be fully audited, farming and participating in web3 and DeFi comes with certain risks:

Impermanent Loss (IL): Impermanent loss in DeFi occurs when providing liquidity to a token pool, and it results from the temporary decline in the value of your assets compared to holding them. This happens due to changing token prices within the pool. The loss is "impermanent" because it can be recovered if you wait for the pool to rebalance.
Negative APY: In this situation, the borrowing interest rate surpasses your yield farming profits, causing your debt to increase faster than your equity value. If this persists, it may eventually lower your equity value to a point that triggers liquidation. Likely causes are: High borrowing pool utilization or a significant price drop in the rewards token (For example Dex Token X).
Liquidation: When you initiate a leveraged yield farming position, Vicuna Finance borrows a base asset on your behalf for farming purposes. However, there's a potential liquidation risk if the price of the borrowed asset rises in comparison to the farming token pair. Your position becomes susceptible to liquidation when the Debt Ratio (debt divided by position value) reaches a specific threshold known as the Liquidation Debt Ratio or Kill Threshold.
Smart Contract Risk: Despite undergoing third-party audits, it's essential to acknowledge the potential existence of vulnerabilities in our smart contracts. Additionally, there is a risk associated with third-party platforms, such as the AMMs we utilize, as they too may contain smart contract vulnerabilities.
Price impact when entering/Existing a position: If you attempt to initiate a sizable position in comparison to the pool's size and need to perform swaps, your transaction may result in a substantial price impact.

PreviousLiquidation NextAudit