Risks

Providing liquidity on app.ichi.org is not without risks. Please don’t supply your life savings, or assets you can’t afford to lose, to app.ichi.org.

Liquidity Provision and Deposits to Vaults

When providing liquidity on app.ichi.org, you are exposed to many risks:

• Smart contract issues

• Impermanent loss: https://cointelegraph.com/news/report-impermanent-loss-on-uniswap-and-other-amms-is-always-permanent

• Market, trading, liquidity, and exchange risks

Vaults are highly risky as they allow for single sided liquidity deposits, and use those to deposit to a liquidity pool. This means deposits are subject to all risks of providing liquidity on an Automated Market Maker (AMM) including but not limited to Impermanent Loss, loss of all funds due to a hack of the contract, negative IRRs, etc. Please do your own research before depositing.

Deposit Token Denominated Loss: Yield IQ deploys capital into UniSwap V3 liquidity pools with the goal to accumulate more of the deposit token. When the FX rate between deposit token and the paired token hovers within a price range or when the paired token grows in value, the vault is able to consistently accumulate the deposit token. Even when the deposit token grows in value, the rebalancing token allocation helps the vault get back to the healthy state quickly when the deposit token value retracts. However, under extreme circumstances, when the deposit token grows in value quickly as compared to the paired token and doesn’t retract (for example, when the paired token gets hacked and loses all its value), the user would suffer deposit token denominated loss. Note that the extreme volatility state would be triggered in this situation and mitigate some loss.

USD Denominated Loss: Yield IQ is designed to accumulate more of the deposit token. Therefore, the user may suffer USD denominated loss when the deposit token price drops significantly. Additional measures to hedge the deposit token price risk may be warranted at the portfolio level depending on the user’s needs and objective.

Minting

1. Smart contract issues, bugs, or economic loopholes/exploits with the ICHI protocol

2. Risks with the digital assets used as collateral, typically stablecoins:

   • USDC risks: https://support.usdc.circle.com/hc/en-us/articles/360001314526-Circle-USDC-Risk-Factors

   • USDT risks: https://tether.to/legal/

   • Maker Dao risks: https://makerdao.com/en/whitepaper/#risk-parameters-controlled-by-maker-governance

3. Market, trading, liquidity, and exchange risks associated with non-collateral, cryptocurrency assets

4. Governance risks: Governance could make poor decisions on treasury management or important stable coin parameters, such as minimum reserve percentage