Risks & Disclaimers
Important information about the risks associated with Blot leverage tokens.
Volatility Decay
Leveraged tokens rebalance periodically to maintain their target leverage. In volatile, sideways markets this rebalancing leads to value erosion known as volatility decay. The higher the leverage multiplier, the more pronounced this effect becomes.
Leverage tokens are best suited for short-to-medium term directional trades, not long-term holding strategies.
Smart Contract Risk
Blot smart contracts are audited, but no audit eliminates all risk. Smart contract vulnerabilities, bugs, or exploits could result in partial or total loss of funds deposited in the protocol.
Oracle Risk
The protocol relies on oracle price feeds for NAV calculations and rebalancing triggers. Oracle manipulation, delayed updates, or feed failures could lead to incorrect pricing or failed rebalancing events.
Liquidity Risk
During periods of extreme market stress, there may be insufficient liquidity to execute rebalancing operations or process redemptions at fair value. The protocol includes circuit breakers, but delays or slippage may occur.
Network Risk
Blot operates on the Ink L2 network. Network congestion, downtime, or sequencer failures on the L2 could delay transactions including critical rebalancing operations.
Risk Mitigation
The protocol employs several mechanisms to mitigate these risks:
- Multiple oracle sources with aggregation and circuit breakers
- Automated rebalancing with configurable thresholds
- Emergency pause functionality for critical situations
- Regular security audits and bug bounty programs
- Transparent, open-source smart contract code