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.
Redemption risk. If you borrow from Balanced, your collateral can be used as a last resort to keep bnUSD at $1. If the price of bnUSD falls below $0.90 and the Stability Fund is empty, traders may choose to redeem bnUSD for borrower collateral. They'll receive $0.90 of collateral and repay $0.995 of borrower debt for every bnUSD they redeem. Redemptions are only available via the Balanced Loans contract, and are spread across a group of borrowers to limit the impact.
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.
Balanced Security Audit | SlowMist | March 2021.pdf
Balanced Security Assessment | FYEO | April 2023.pdf
Balanced has an ongoing bug bounty program through Immunefi, which is targeted at bugs and vulnerabilities that put investors’ funds at risk or compromise the smart contracts.
InsurAce provides coverage against Balanced smart contract exploits in exchange for a 3.15% annual premium.
All claims are assessed by insurance experts, and paid based on the outcome of a vote by $INSUR token holders. Insure your Balanced position through InsurAce.