Risks
Investments in Struct Finance's Vaults and GMX's GLP token are subject to several types of risk. These include, but are not limited to:
Smart Contract Risks:
One of the main risks of smart contracts in DeFi is the potential for bugs or vulnerabilities in the code. Because smart contracts are executed automatically, any errors or vulnerabilities in the code can have serious consequences, such as the loss of funds or the inability to access assets. In addition, because smart contracts are immutable, once they are deployed on the blockchain, they cannot be changed or corrected, which means that any errors or vulnerabilities must be addressed before the contract is deployed.
To mitigate these risks, it is important to carefully review and test the code of a smart contract before deploying it on the blockchain. This can help to identify and address any potential issues, reducing the risk of loss or other negative consequences.
Smart contracts may be susceptible to security breaches and improper administration. Participant organizations or the network administrator will need a strong governance and change control process to deploy new or amend existing smart contracts. They will also need a robust incident management process to identify and respond to glitches in smart contract operations.
Protocol Risks:
Accessing Struct Vaults and investing in GMX's GLP token exposes investors to protocol-level risks. These include technological risks linked to the performance and security of the underlying blockchain protocols, counterparty risks, which involve the default of a party involved in the protocol, and liquidity risks, which arise from insufficient liquidity in the trading pair of interest.
Market Risks:
Any investments in DeFi products, including GLP tokens, inherently carry market risks. These risks involve the potential for price volatility, reduced liquidity, and counterparty risk. Given the nascent stage of the DeFi industry, these risks can be substantial and can lead to partial or complete loss of investment.
Token Risks:
The GLP tokens represent a unique set of risks. These include smart contract vulnerabilities, counterparty risk associated with the GLP pool, and risks related to bridged tokens and pegged tokens, such as instability of the peg and risks associated with the bridge's smart contracts.
Regulatory Risks:
The DeFi space is a new and rapidly evolving industry which may be subject to significant regulatory scrutiny. Changes in laws or regulations, in the U.S. or internationally, could adversely affect the use of cryptocurrency or the operation of the blockchain network upon which it is reliant.
Investors are strongly advised to conduct their own thorough research, assess their risk tolerance, and possibly seek professional advice before investing in Struct Finance's Vaults and GMX's GLP token.
Counterparty Risks:
Counterparty risk is a crucial concept in the world of DeFi and affects many protocols and assets, including GLP (GMX) tokens. In DeFi, counterparty risk refers to the possibility that the other party in a financial transaction may fail to meet their obligations, leaving the investor with losses. In the case of GLP tokens, the counterparty risk stems from the fact that GLP pool is the counterparty to traders who use the protocol. When traders make a profit, it comes from the value of the GLP pool.
Counterparty risk can occur due to various factors, such as a lack of transparency, an inability to assess the creditworthiness of the other party, or external events such as market shocks or changes in regulations. While DeFi protocols are designed to minimize counterparty risk through automation and smart contracts, it is important to note that they are not immune to counterparty risk. Smart contract vulnerabilities or external events could still cause losses.
The risks associated with counterparty risk in DeFi and GLP include a reduction in the value of GLP tokens due to trader losses, decreased liquidity due to traders exiting positions, and a decrease in overall market confidence in the protocol. To mitigate counterparty risk, DeFi protocols often use measures such as collateralization, overcollateralization, or insurance to ensure that losses can be absorbed without affecting the overall stability of the protocol. It is important for investors to consider counterparty risk when evaluating DeFi protocols and assets such as GLP tokens, as it can impact investment returns and the overall success of the protocol.
Please note that this Risk and Fact Sheet is for general information purposes only and does not constitute financial or investment advice. Investors should carefully review all relevant documentation and consider their individual circumstances and risk tolerance when making investment decisions.