Risks
What can go wrong, stated plainly, including the things the protocol cannot protect you from.
The obvious temptation
Borrowing against your own token
It looks like a machine for free money: buy your token, borrow against it, buy more, repeat. It does not work, and the reason is arithmetic. Each loop returns only the loan-to-value fraction of the previous one, so the series converges almost immediately.
Start with
$1,000
Borrow at 30%
$300
Then
$90 → $27 → …
Total pressure
≈ $1,429
Testing this end-to-end, $1,000 of attacker capital peaked at roughly a $40,000 market cap — around 25,000× short of a billion — and the position ended down 99% once the buying stopped, while lenders and liquidity providers came out close to whole.
Cheap to mark, impossible to exit
Pushing a price up is inexpensive in a thin pool. Selling at that price is not: you can only remove what the pool actually holds. The number you see and the money you can realise are different quantities.
By role
What each participant is exposed to
| If you are a… | Your main risk | What limits it |
|---|---|---|
| Liquidity provider | Impermanent loss — the pool sells winners and buys losers on your behalf | Swap fees; deeper pools and steadier prices |
| Lender | Capital locked while utilisation is high; bad debt if collateral falls faster than liquidators can act | Steep rates above 80% utilisation, over-collateralisation, insurance reserve |
| Borrower | Liquidation at 40% health, costing a 10% penalty | Partial liquidation in chunks; repay or add collateral early |
| Perp trader | Liquidation at 4% margin; funding costs while holding the crowded side | Blended price for liquidation, funding cap, insurance for shortfalls |
| Vault depositor | Yield can approach zero; large exits are queued | Idle bucket for instant exits, emergency exit at 5% |
Be aware
Structural limits
Some risks are inherent to permissionless launches and cannot be engineered away:
- Anyone can launch anything. There is no review. A token's name implies nothing about who made it or what they intend.
- Thin markets move violently. A newly graduated pool holds around $12,000. Modest orders move the price a lot, in both directions.
- Concentrated ownership. Whoever bought early on the curve may hold a large share of supply and can sell it at any time.
- Leverage multiplies both directions. 10× exposure means a 10% adverse move erases the position.
- Smart contract risk. The programs are unaudited. Treat every deposit as capital you can afford to lose entirely.
On your side
What the protocol does do
- Founding liquidity is burned at graduation and can never be withdrawn by anyone.
- Collateral and liquidations price off a 90-second average, not a single trade.
- Borrowing is capped by real pool depth, so debt cannot exceed what the market could repay.
- Funding is paid only between matched traders, never out of protocol funds.
- Creators receive no allocation — only a share of fees if the token genuinely trades.
Devnet
This deployment runs on Solana devnet with a test USDT mint. Nothing here has monetary value and state may be reset without notice.