The risks mentioned below are likely to be encountered when participating in any DeFi/LSDFi protocol. These risks are not unique to STFIL.

Potential Risks to Stakers

Bad Debt:

  • Risk: the risk of debt accrued in case nodes suffer huge losses due to external factors.
  • Mitigation: losses of node are first covered by the equity value of the node itself, followed by the risk reserve fund of the STFIL, and finally by stFIL holders in the pool.

Timing of Asset Return:

  • Risk: in the event of a run on the pool due to high utilization, stakers may experience a delay in receiving their staked assets back. Please note that storage providers can borrow funds indefinitely without a fixed repayment deadline.
  • Mitigation: we use a two-tiered slope interest rate to optimize for 80% fund utilization. The steep increase in interest rate beyond the 80% utilization should incentivize more stakers to stake funds and borrowers to return outstanding loans, optimizing the pool to stay at a flexible level below ~80%.

Smart Contract Risks

  • Risk: Although third-party firms have conducted audits on our smart contracts, it is still possible for them to contain vulnerabilities in theory.
  • Mitigation:
    • Having smart contracts audited by multiple professional third-party firms decreases the chance of vulnerabilities.
    • We also run a bug bounty program to provide incentives for people to look for vulnerabilities in our live code as an extra layer to filter out any potential issues.
While we do our best to eliminate all possible risks, the DeFi industry is inherently unpredictable and can experience unforeseen events (known as "black swans"). We strongly advise against investing your life savings or risk assets you can’t afford to lose.Try to be as careful with your funds as we are with our code. 😊