⚠️Yield Synth Risk Analysis

Yield Synths must overcome the following risks:

1. Funding Rate Risk

2. Exchange Risk

3. Insurance Fund

Funding Rate Risk

Although perpetual funding rates are generally positive, they can turn negative for periods. Our Yield Synth has the flexibility to sit out these periods of negative funding yield and focus only on those markets that generate a strong positive return. We are not forced to stay in a short perpetual position as a result of our protocol design.

Exchange Risk

We use off-exchange collateral providers such as CEFFU and Copper to reduce our exchange counterparty risk.

Insurance Fund

A proportion of the yield generated by the protocol will be put into an Insurance Fund to ensure that dollar-denominated principal protection is preserved. As we have little exposure to the 'negative funding yield' problem, it is unlikely this will be used.