Platform risk

Platform Risks

As with all areas of Decentralized Finance (DeFi), users and stakeholders of Sypher Finance need to be aware of various risks associated with our platform:

Tranche Liquidity Risks:

At Sypher Finance, we prioritize risk management in our liquidity system, allowing Liquidity Providers (LPs) to select their risk exposure when providing liquidity. However, being an SLP still involves certain risks:

• Price Fluctuations: SLPs are susceptible to price changes in the underlying assets of each tranche.

• Counterparty Risk: SLPs bear the counterparty risk of traders, effectively taking on the inverse of their Profit & Loss (PnL).

• Asset Imbalance: SLPs may experience unbalanced exposure if the actual weight of an asset in a tranche deviates from its target weight, impacting the SLP's price.

• Liquidity Shortages: Insufficient liquidity can arise in a tranche for servicing trades if the trade size is unusually large or if the asset's utilization is already high. Sypher Finance reallocates the unavailable portion to the next tranche in decreasing risk order.

• Price Manipulation: External price sources might be vulnerable to manipulation. To mitigate this risk, we impose trade size limits on lower liquidity assets and adjust Chainlink Price Feed Oracle parameters.

Liquidation Risks:

Open trade positions may be liquidated if the collateral cannot cover the margin fee or falls below the maintenance margin threshold. Our liquidation process is managed by designated keepers.

Smart Contract Risks:

Decentralized applications inherently carry smart contract risks due to potential vulnerabilities in their code. Security is a top priority at Sypher Finance, and we have undergone multiple audits and maintain a live bug bounty program. The Sypher DAO oversees the platform's security and can commission further security measures as necessary.

For further details, please refer to our comprehensive Risk Disclosure.