Bagels Finance
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Protocol introduction
Bagels Finance's participation programs
documentation
Security and Risks
Bagels has always put security first. Bagels is provided with technical support and in-depth incubation by Merkle Labs in Silicon Valley. Merkle Labs has a strong technical team from three countries, the United States, China and Canada. Most of them come from the University of San Francisco, Berkeley, University of Waterloo and other north American universities, with excellent technical background and practical experiences. Bagels products have been audited by two authorities, Certik and Knownsec, and are free of security vulnerabilities.
Bagels also made an important innovation. Bagels smart contracts are independently licensed, which maximizes the security of users' assets.
Although we take a multitude of safety precautions and Bagels was audited, farming and participating in DeFi comes with certain risks. Below, we discuss the potential risks associated with using Bagels Finance.
Potential Risks for Lenders
Swearing
Risk: In a highly volatile market cycle, if a position with an excessively high risk rate is not liquidated in time, the position may generate debt risk or even wear out.
Measures: Bagels adopts a cautious approach when setting key parameters to ensure that there is a large buffer zone. At the same time, we continuously upgrades its clearing function to clear high-risk positions in a timely manner to minimize this situation. In addition, Bagels will launch an insurance pool to protect the interests of depositors more.
Refunds Time
Risk: In the case of a high utilization rate of the fund pool, there may be the possibility that assets cannot be recovered in time. Please note that because there is no fixed time for asset return, miners can always borrow funds.
Measures: Bagels uses a triple-slope interest model to optimize the situation when the capital utilization rate reaches 90%. When the fund utilization rate rises sharply by more than 80%, the lending rate will rise almost linearly, which will encourage more lenders to deposit funds, and borrowers will return the outstanding loans in time, optimize the utilization rate of the fund pool, and make the utilization rate Keep it below 80%.
Potential Risks for Yield Farmers：
Impermanent Loss
As a yield farmer or liquidity provider, you are providing liquidity and you will face the risk of impermanent loss. This is when the price of your tokens can change from when you deposited them in the pool. The larger the change is, the bigger the loss could be. You run the risk of impermanent loss in every liquidity providing or yield farming protocol. E.g. BNB/USDT, no matter the BNB price goes up or down, Farming position will have losses compares to holdings. But the IMP when BNB price rises is less that the IMP when BNB price down.
Negative APR
Risk：When the Borrowing Rate higher than the liquidity farming APR, that means the Borrowing interest rate will grow faster than the farming APR.
Possible reason: Excessive utilization in the Lending pool leads to a higher borrowing rate. The token price of rewards fell sharply.
Measure：Pay attention to whether the utilization of the Lending pool is too high before opening a position. Closely monitor your position and immediately close or add collateral once it shows negative APR.
Liquidation
Risk：When open a leverage position, if the debt value is greater than the position value, then the position is at risk of being liquidated. When the debt ratio(Debt Value/Position Value) of position reaches the liquidate ratio (KillFactor) will be liquidated.
Measure: We suggest using lower leverage and real-time monitoring of positions when the market is highly volatile, and actively closing position or add collateral before liquidation to reduce risks.
Smart Contract
Risk：Although Bagels Finance uses the Vyper language used by very few people to write smart contracts, which means that it has a high technical barrier and has passed the audit of two third-party security companies, in theory, they may still have vulnerabilities.
Measure：1) We are applying for review by multiple audit companies to minimize the possibility of vulnerabilities. 2)Publish a bug bounty program to incentivize those who find vulnerability in the smart contract to contact us to send reports instead of using it to attack.
While we do our best to eliminate all the possible risks, DeFi is an industry where events that no one predicted can occur(the dreaded black swans). So please don't invest 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.