Smart contract
- Audited, but residual bug risk exists
- Composability with external protocols
Market
- Yield and correlation volatility
- Liquidation risk in leveraged positions
Operational
- Network stability and infra dependencies
- Governance and regulatory changes
Strategy‑specific
- Strategy Risk: DeFi is inherently risky, and events like smart contract exploits on underlying protocols (e.g., GMX, Dolomite) can expose a user’s allocation to risk. However, Blend is designed to mitigate this risk in several ways:
- Compartmentalized Exposure: Only a portion of your funds is ever exposed to a single strategy. You set your own risk tolerance, and Blend’s engine allocates capital accordingly.
- Diversification: By diversifying across multiple strategies and venues, Blend reduces the impact of any single point of failure.
- Proactive Derisking: The system is designed to automatically unwind positions if it detects adverse market conditions or increased risk, long before a liquidation becomes necessary.
- Delta‑neutral: correlation breakdown, LTV flux, flash loan capacity
- Cross‑chain: bridge security, gas volatility, liquidity fragmentation
DeFi is inherently risky. Understand these factors before participating.