Using Perena, like any DeFi system, involves inherent risks that users should understand before participating. While we outline key risks below, this list is not exhaustive given the dynamic nature of DeFi. We regularly update this documentation to address emerging threats and developments in the risk landscape.

Technical Risks

Smart Contract Risk

Smart contracts form the foundation of blockchain applications. While designed for security, these self-executing programs can present several risks:

• Potential vulnerabilities despite security measures
• Integration risks with multiple protocols and stablecoins
• Possible exploitation leading to loss of funds

Transaction Immutability

• All blockchain transactions are permanent and cannot be reversed
• Errors in transactions cannot be undone
• Users must verify all transaction details before confirmation

Economic Risks

Stablecoin De-peg Risk

The protocol's exposure to stablecoin stability presents significant risks:

• Stablecoins may lose their peg to reference assets
• Permanent de-pegging can lead to proportional losses for liquidity providers
• Example: In a pool with 45% USDC / 35% USDT / 20% PYUSD composition:
  • If PYUSD de-pegs to $0.50, LP value could decrease to 90% of original value

Protection Features

• Hub-and-spoke model with USD* isolates de-peg risk
• Bounded liquidity design limits exposure