Risks

It's important for any Filecoin token holder to understand the risks of using GLIF, and what we're doing to mitigate those risks:

1. Smart contract risk - with any DeFi protocol, the risks of malicious hacks and/or sensitive bugs is a risk that must be considered. Time is the best test of a DeFi protocol, so this risk decreases as time passes. To mitigate smart contract risk, GLIF has undergone 3 professional audits.

2. Financial math risks - In the previous section, we discussed recovery rates - the % of FIL that will be recovered in a liquidation event. Another risk to consider is that our predicted recovery rates are over-estimated, meaning we believe we can recover a larger amount of FIL than we actually can if the scenario plays out in real life. We're doing a couple things to mitigate these risks:

   1. We're using conservative recovery rates (50%), which are both lower than the average recovery rate we noticed in our research (60%), and also lower than the presumed recovery rate that CeFi lenders have been relying on for the past couple of years (70%).

   2. We're reevaluating recovery rates as the Filecoin network's economics change. Recovery rates are not a static metric, and will change as the underlying network's economics change.

In general, we strongly encourage you to do your own research on lending/staking protocols, both CeFi and DeFi. There is no FIL rewards program that comes without risk, and any project or company that markets a risk free FIL rewards program should be treated with strong skepticism.