☒️ Risks

Understanding the risks associated with using DeFiDollar.

Has the code been audited ?

DUSD smart contracts were audited by PeckShield and Quantstamp and all identified issues were fixed, resolved and re-audited.

Although audits reduce the risk by virtue of having dedicated professionals review the code but they do not eliminate the risks altogether. Please exercise your discretion before putting any funds in Defidollar.

Are there any risks in using DefiDollar?

DefiDollar is the result of DeFi's composability. It also carries the associated risks which we tried to list below: Internal:

  • Issues in DefiDollar smart contracts.

  • Centralization with reward distribution.

External:

  • Systemic issues and smart contract bugs in Curve. See https://www.curve.fi/risks.

  • Systemic issues with Chainlink price oracles.

  • Systemic issues with the stable coins in supported peaks.

DeFiDollar is an experiment in beta so do not put any funds in that you can’t afford to lose.

What are the risks associated with staking?

Please note that while staking is disabled currently. We have retained the risks in the docs to make sure that the community is familiar with the associated risks once we reinstate staking.

It is imperative to understand the risks associated with staking DFD/DUSD. Understand risk and rewards go hand in hand. No free lunches. 1. In the event of peg failure of the underlying stablecoin assets, the stakers act as buyers of the last resort in the DeFiDollar protocol. 2. Staking can lead to impermanent loss if and when the underlying stablecoins temporarily fall below the $1 mark (i.e. the DUSD becomes under-collateralized by a thin margin). 3. Staking can lead to permanent loss if the underlying coins stay below their peg for a prolonged period of time. Please be cognizant of the risks involved with staking, as staking can lead to partial or complete loss of funds.

In case the protocol becomes under collateralised (i.e. when Total Assets < DUSD supply) the staked funds are tasked into acting as the ultimate backstop. Depending on the extent of the under collateralization, a proportion of the staked funds will become locked. Stakers therefore can not withdraw all the staked funds but only the withdraw-able amount that is reflected on the staking tab. Once the deficit state ends, these locked funds will be unlocked.

It is important to note that if DUSD holders redeem their DUSD in a state of deficit the stakers will bear that cost. This will result in a permanent loss of a portion of their staked funds depending on the amount of funds redeemed and total assets staked.

Please see the staking description for more details.

What will happen in case of a Peg failure / Black Swan event with the underlying Stablecoins?

Staked funds in Defidollar act as a backstop in case of peg failure but they are not guaranteed to cover the deficit completely. Such a scenario might result in temporary/permanent loss of capital. If DUSD users withdraw in such a scenario the redemption rate of DUSD can be < $1.

Is DUSD fully permission-less?

Yield Studio Pte. Ltd. ( The parent company of DefiDollar) does not have access to the minted DUSD. To be agile in deployment and with fixes in the early days of the protocol the contracts are upgradeable in nature. Also, the decision on Liquidity mining reward distributions will be managed by the team to begin with. In the future, these decision making privileges will be transitioned to the community.

Does using DefiDollar Protocol generate taxable events?

We cannot provide tax or accounting advice. Tax regulations are specific to the jurisdiction where you or your company reside. For any legal or tax matters we recommend consulting your own attorney.