Understanding DeFi Risks
Important risks to understand when using Metalos vaults.
Important risks to understand when using Metalos vaults.
DeFi investing carries risks that differ from traditional finance. This guide explains the key risks you should understand before depositing into Metalos vaults.
What It Is: Bugs or vulnerabilities in vault contracts, underlying protocols, or integrated services could lead to loss of funds.
Mitigation:
Despite audits, smart contract exploits remain possible. Only deposit funds you can afford to lose.
What It Is: Asset prices can change dramatically, affecting your position value.
By Strategy:
What to Know:
What It Is: Ability to exit positions quickly without significant slippage.
Considerations:
Best Practice: Size positions appropriately for the pool liquidity
What It Is: The underlying protocol could fail, be exploited, or change in ways that affect your position.
Due Diligence:
What It Is: Issues with Metalos integration layer, automation, or infrastructure.
Reality: Metalos is a new platform. While built on proven components (Beefy, Base, established protocols), the integration layer is being tested in production.
What It Is: Base network issues (downtime, congestion, security problems) could affect access to your funds.
Context:
| Tier | Overall Risk | Primary Risks | Suitable For |
|---|---|---|---|
| Extremely Safe | Very Low | Smart contract, USDC depeg | Conservative investors, DeFi beginners |
| Not Very Risky | Low-Medium | Smart contract, IL (low), ETH volatility | Balanced portfolios, moderate risk tolerance |
| Moderately Risky | Medium | Smart contract, IL (high), token volatility | Experienced DeFi users, higher risk appetite |
"Risk level" ratings (1/5, 2/5, 3/5) shown on strategy pages are relative comparisons between tiers, not formal quantified scores.
❌ Not FDIC Insured: DeFi protocols don't have deposit insurance
❌ Not Zero Risk: All strategies carry smart contract and market risk
❌ Not Guaranteed Returns: APYs are variable and can decrease
❌ Not Regulated: DeFi operates outside traditional financial regulation
✅ Transparent vault addresses you can verify on BaseScan
✅ Audited vault contracts from established provider (Beefy)
✅ Real-time monitoring and position tracking
✅ Clear risk tier categorization
✅ AI tools to research protocols and analyze risks
Use the Research Chat to investigate:
Check all vault addresses on BaseScan:
Make your first deposit a test amount:
Don't put all funds in one vault or tier:
If you see or suspect a problem:
Capital preservation comes first. If you're uncertain about your positions, withdrawing to stablecoins is always an option.
The AI research tools can help evaluate risks:
Example Questions:
The AI fetches data from DexScreener, DeFiLlama, BaseScan, and GitHub to provide comprehensive risk analysis.
See all available strategies and their characteristics
Understand IL risk in LP strategies
How liquidity provider tokens work
Use AI tools to research protocol risks
Metalos exposes capital to smart contract risk, market volatility, and counterparty failure. Only deposit funds you can afford to lose and perform independent due diligence before allocating capital.