Risks for users
Disclaimers. Please read.
Many teams focus on why you should use the products they make. But in crypto Defi, there are lots of risks, and it is responsible for a team to tell you those risks and reasons not to use the product.
We also outline steps we took to protect against these.
Basin Vaults
Bad debt: In extreme market conditions, liquidating collateralized positions could fail to result in bad debts. Basin vaults only accept the most liquid and robust collaterals. We work with other protocols and individuals to maintain a community of liquidators, direct a portion of fees to an insurance fund, and reduce collateral factors for larger positions to mitigate this risk. Regardless of these steps, a black swan event may cause collateral to lose value too quickly to be liquidated safely.
High-interest rates: If synths start to trade below their pegs, one of the mechanisms to combat this is to increase the interest rate borrowers are paying, incentivizing the purchase and closing of positions.
Basin Baskets
Underlying token volatility: The underlying tokens in each basket are subject to the behaviors or problems that their protocol faces. Basin mitigates this risk by preventing tokens within baskets from being tradeable with each other, like AMM LP tokens like Uniswap, Sushi, or Balancer LP, so any price movements will not affect the value of other token allocations in the basket.
General risks
Front-end errors could break the ability to interact with the contract.
Exploits, we do not know what we do not know. There may be undetected bugs in our contracts that could lead to a loss of user funds. To mitigate this risk, we use fork code from established and battle-tested protocols where possible, and rigorously test products.
The Basin team may be unable to deliver on future stages of the project if they do not retain their technical talent, face financing concerns, or governance challenges such as being voted out of their positions. We try to mitigate this by rewarding our contributors at competitive rates while carefully managing our runway and seeking safe yield.
The Basin team may be unable to deliver on future stages of the project if changing legal or regulation demands it. We try to air on the side of caution when making decisions that could have regulatory consequences.
Due to technical challenges, the Basin team may not be able to deliver on later stages of the project. If this becomes apparent, the core team will propose a new agenda that includes a new vision and roadmap, aligning as much as possible with the current vision.
Like all DeFi startups, Basin has a risk that it may not be successful or may drop in price.
If you do not understand this, then please do not use Basin.
Basin Team will be focused on making decisions that are best for the long-term healthiness of the Basin products, governance, and community; this means that in the short term, these decisions may not always be best for the price of tokens.
Your use of Basin products should be focused on earning more $BASIN tokens and the long-term success of the Basin protocol.
Why you should not buy BASIN
It is essential to understand that BASIN is not an offer for investment. It is a community project. When participants provide liquidity for our synthetics, they are rewarded with the Basin governance token, which lets users partake in the governance process and have a claim to fees from the ecosystem.
However, you should not buy Basin if you are not an active participant in the ecosystem, and you should not use Basin at all, depending on your risk tolerance.
Please do not buy or use Basin if:
You think Basin can only go up.
You do not know the emission plan or lockup.
You do not know how supply inflation could potentially impact the price.
If you are using money you cannot afford to lose.
You are concerned about the short-term price.
You are using too much of your portfolio in Basin.
You are unfamiliar with Impermanent Losses.
You are unable to interact with a contract via Basescan directly.
If you do not actively keep up with projects when you hold their token.
You do not want to engage in governance.
You have a low-risk tolerance.
Like all Defi startups, Basin has a risk that it may not be successful or may drop in price.
If you do not understand this, then please do not use Basin.
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