Risks and Mitigants

The risks from liquidity provision, and possible mitigants.

A vault is high risk when its TVL is a large % of the pool TVL as measured by Vault/Pool, or if the pool's TVL is low.

These vaults have an increased risk of market manipulation and adverse selection, both of which can lower your returns. Please deposit in small amounts, and frequently monitor the performance of your positions in high risk vaults. High risk vaults will be clearly indicated on the front-end before every deposit.

Trending markets

The vaults are likely to underperform if the price only moves in one direction (ie in a trending market).

LPs should therefore closely monitor a vault's strategy, and withdraw if they believe the market price will consistently move outside the Liquidity Position chosen by the vault.

Short term under-performance

Alpha Vaults offers a type of passively managed LP Strategy that focuses on transparency and long-term performance. They may underperform actively managed LP Strategies in the short term.

LPs should therefore monitor the performances of different vault providers to decide whether Alpha Vaults remains the best option.

Unexpected Volatility

LPs should regularly update their view of how the price will move, to decide whether it's consistent with the vault's strategy. If not, they should withdraw their funds, or change the vault's parameters.

Security risks

Alpha Vaults have excellent security credentials, but security incidences may still happen.

This is why on top of the 2+ years of testing on Mainnet, all vaults have received three audits (two by Peckshied and one by Certik).

A bug bounty programme is also in place to ensure the code is continuously monitored by the cybersecurity community.

Manager risks

Anyone can create a vault, and as such, please do your due diligence on the vault managers before depositing.

Charm will make every effort to verify vaults to establish who has created the vault, but can NOT provide assurance the vaults (and therefore your deposits) will not be mismanaged.

If anyone suspects mis-management, or otherwise griefing of a vault, please report it in Charm discord.