Warp pill #6: What are the risks in using Warp?
As always, we want informed users, so here’s the main risks associated with Warp:
- smart contract risk: we carefully designed and tested the contracts on Nile and mainnet, but human error can never be excluded 100%;
- capital risk: in case of TRX price variations, the value of the underlying assets (deposits, borrows and LP value) can go below 100%. The team will make sure that over time an adequate reserve will be created to handle these events and make sure the user capital is always 100% covered. This parameter is clearly shown on WARP app and is currently at 100.2%;
- liquidation risk: TRX is borrowed from JustLend against USDD deposits. The strategy is balanced so that if TRX price increases up to 85% there is no liquidation risk. The team will continously monitor the margin and act to re-balance the strategy in case of significant variation from nominal;
- USDD price risk: the contract works with USDD, so all values are relative to USDD. If USDD price is deviates from nominal (1$), the same will happen to the deposit value. This risk is NOT strictly related to Warp, but is present every time the user holds USDD (or any other token).