Risk Management

Risk Management

Overview

Like any DeFi protocol, FIVA involves various types of risks that users should understand before participating. This section outlines the main risk categories and how they are managed within the protocol.

Risk Categories

Market Risk

• Yield fluctuations in underlying protocols

• Token price volatility

• Changes in market sentiment

• APY variations

• Liquidity conditions

Smart Contract Risk

• Protocol smart contract vulnerabilities

• Integration risks with underlying protocols

• Oracle reliability

• External dependencies

Protocol-Specific Risks

YT Token Risks

• Leverage exposure (up to 20x)

• Yield rate changes

• Time decay of value

• Market pricing inefficiencies

PT Token Risks

• Duration risk until maturity

• Market price fluctuations before maturity

Liquidity Pool Risks

• Trading volume fluctuations

• Market making risks

External Risks

• Underlying protocol performance

• Blockchain network issues

• Market-wide events

• Regulatory changes

Risk Mitigation Strategies

For Users

• Start with smaller positions to understand mechanics

• Diversify across different assets

• Understand leverage implications

Protocol Level

• Security audits (in progress)

• Gradual feature rollout

• Oracles implementation (in progress)

Best Practices

1. Research thoroughly before participating

2. Understand all components of yield generation

3. Stay informed about protocol updates

Note: This is not an exhaustive list of risks. Users should conduct their own research and consider their risk tolerance before participating in the protocol.