Instadapp Lite
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Risks

What are some of the risks?
Decentralized Finance and products like Instadapp Lite are uniquely designed and we recommend users take time to fully understand the mechanisms and unique risk to using DeFi Applications.

What are the risks of using Instadapp Lite?

Instadapp Lite utilizes multiple DeFi protocols and mechanisms to generate a passive yield. Instadapp Lite carries inherent risk such as smart contract bugs, market volatility, and other vulnerabilities such as oracle or price manipulations. On Instadapp Lite we utilize both staked assets as well as leverage to generate high yields. That means that Instadapp Lite incurs both protocol risk and smart contract risks and market risks.

Risk Adversed Approach

We strive to create a sustainable and long lasting product, as such Instadapp Lite is built on long established DeFi protocols and handles highly liquid DeFi strategies. This ensures that under any market conditions vaults can be safely deleveraged or adjusted with minimal to no loss. Under unfavorable deleveraging events the vaults may loss some value. We have ongoing developments to improve the stETH price peg to ETH in the overall market.

Rebalances and Temporary Losses

Vaults can be deleveraging through our automation server. If vault gets risky it will deleverage by selling stETH and paying back WETH debt. This kind of automation if required or occurs, would occur a minimal lost by trading slippage. These losses kinds of losses would be recovered in 1 to 7 days.

DeFi Legos: Multiple Protocol Usage

Instadapp Lite utilizes multiple protocols to create one strategy; utilizing more protocols creates more inherent risks by utilizing more code and dependencies. For users to fully understand the risks associated with utilizing a complex Defi Lego they must be able to evaluate the risks associated with their components. For Instadapp Lite this is the lending protocol AAVE and the staked Ethereum asset from Lido DAO (stETH). We advise users to learn more about these protocols to fully understand their individual risk profile to better understand their risk when they are utilizing in conjunction and used on Instadapp Lite.

Derivative Asset backed Token

Staked Ethereum from Lido is a derivative product of ETH backed by 1 ETH on the Etheruem beacon chain. stETH is not redeemable on the Ethereum beacon chain until sometime after the merge and may experience price fluctuations on the open market until that time. Changes in stETH price may cause the Lite vaults to rebalance and in some cases may generate short term or long term losses to your position.

Leverage Strategy

Instadapp Lite uses a recursive strategy for stETH on AAVE by borrowing against ETH. Users should understand the risks associated with a leveraged strategy. Similar to traditional finance, a leverage grants greater exposure to an asset at the cost of smaller margins; in DeFi these concepts may be even more nuanced because these positions are governed by code and may allow functionality that have no analogues in traditional markets.

Automation and Autonomous Execution

Instadapp Vaults have automation functions which automatically rebalance the vault during market changes. Automations are executed on chain and carry their own inherent risks such as price oracles issues, smart contract bugs or other blockchain or other technical errors.

Governance Changes to Infrastructure

AAVE and Lido are both separate protocols that can at times change different parameters of their markets. There are governance risks which may change or require the Instadapp Lite vaults to adapt to changing governance measures by AAVE or Lido. Instadapp Lite users assume and accept any changes submitted by the team to these vaults in response to these independent protocols.

Management

The Instadapp Lite vaults are a specialized DeFi primitive; at times the Instadapp team may need to adjust or make changes to the vault contracts or updates to their strategies and settings.
The vaults are owned and managed by the Instadapp team's multi-sig wallet at this time: 0xa8c31E39e40E6765BEdBd83D92D6AA0B33f1CCC5 In the future the administration can be shifted to a governance controlled timelock contract.
By using Instadapp Lite you agree to the risks and accept any changes the team may implement to the vaults such as any parameters, settings or changes to code, etc.