Before you use Balanced, it's a good idea to understand the risks:
Smart contract risk. Balanced smart contracts have been audited, but there’s always the possibility of a bug or vulnerability that compromises participants' funds. It would not be possible to recover them.
In the event of a smart contract bug, Balance Token holders could vote to use the DAO fund and emergency reserve fund to cover or reduce the amount lost.
Liquidation risk. If your collateralisation ratio drops below 118% (85% LTV), you’ll lose all your collateral, but you also get to keep any borrowed assets.
Rebalancing risk. If you borrow from Balanced, your collateral is sometimes used to keep the value of bnUSD at $1. If bnUSD is below $1, collateral is sold and a larger amount of debt repaid. Above $1, debt is increased and used to buy more collateral. Rebalancing can be triggered when there’s at least a 10% price difference, but the community can adjust the threshold at any time. Learn how rebalancing affects your position.
Impermanent loss. If you supply two assets to a liquidity pool and the value of one (i.e. sICX, BALN) rises in comparison to the other (i.e. bnUSD), your supply ratio will move in favour of the bnUSD as people trade within the pool. On paper, your assets will be worth less than if you held them in your wallet, but the loss only becomes permanent if you withdraw liquidity before the price falls again. Learn more about impermanent loss.
Smart contract audits
The Balanced smart contracts have been audited by SlowMist, and reviewed by ICON experts and third-party developers.