Risks

How GLIF works to minimize risks

Smart contract risk

With any DeFi protocol, the risks of malicious hacks and bugs must be considered. While these risks naturally decrease over time as the protocol proves its resilience.

To mitigate smart contract risk, GLIF:

• has undergone multiple professional security audits

• constantly monitors the protocol for unusual activity and behavior

• controls admin functionality to pause the contracts in case of malicious behavior or attacks

• continuously runs ongoing live data checks to ensure the contracts are operating correctly

Financial Math risk

In the previous section, we discussed liquidation value—the FIL recovered in a liquidation event. A key risk is overestimating the liquidation value of a specific Storage Provider (SP) in the system. In the case of a liquidation value overestimation, the protocol may recover less assets in a liquidation than expected, which could create losses for Liquidity Providers (LP).

To mitigate the possibility of overestimation, GLIF monitors are continuously simulating Miner liquidations to check results every 24 hours.

Consensus Fault Risk

One attack vector an SP could use to create losses for LP is to commit consensus faults to the Filecoin network. This would essentially mean the SP submits invalid blocks to the network, resulting in more severe penalties. However, in an event described above, the SP would lose far more FIL tokens than any LP would lose, so there is no game theoretical or financial incentive to attack GLIF by committing consensus faults to the Filecoin network.