Dangers

Interacting with Flux is not completely without dangers. Hence it's important to inform you of them.

Some of the main risks are:

Smart contract risk Errors in the smart contract are always a possibility. Risks include but are not limited to resources getting stuck or resources being drained.

Liquidation risk When a loan's LTV surpasses the max LTV, it is possible to be liquidated. This leads to having to pay the liquidation penalties.

Oracle risk Manipulation of the oracle(s) we use can lead to inaccurate liquidations and other actions that should not be possible.

Depeg risk Market conditions could lead fUSD to trade at a price far from the (target) internal price. Were this to happen repaying a loan (or liquidating), might become unfeasible. It might also become unfeasible to buy back collateral in Flux Reservoirs. This would mean depositors are not only exposed to fUSD price, but collateral prices as well.

Liquidity risk If fUSD liquidity is low, the system starts behaving in a suboptimal way. Reservoir buybacks might not be possible anymore. Other parts of the system might behave in unwanted ways as well.