FAQs
The Product
What is The Risk Protocol (TRP)?
The Risk Protocol is a risk marketplace that allows you to turn risk itself into a programmable, tradeable token–you can price, tokenize, hedge, and trade different kinds of risks in crypto. The core idea is simple yet powerful: “if risk is abundant in crypto, why not make it tradable?” By turning risk into a tradable asset, TRP enables users to adjust their risk exposure according to their risk appetite, filling a critical infrastructure gap.
What can I actually do with TRP today?
Initially at launch, you can deposit BTC or ETH and split it into two fully-collateralized SMART Tokens: a low-volatility “RiskOFF” token and a leveraged “RiskON” token. Hold whichever token matches your market view, swap between them as conditions change, or provide liquidity to earn fees. In practice, this allows you to move smoothly between defence (RiskOFF) and alpha-seeking (RiskON), without needing to build complex derivatives trades yourself. The underlying derivatives are abstracted away, allowing you to focus on the payoff that is of interest to you instead of the mechanics of how to implement it.
What are SMART Tokens, RiskON, and RiskOFF?
Using our proprietary SMART mechanism, we can split an underlying asset into two SMART Tokens with defined risk/return payoffs. These SMART Tokens represent fully collateralized claims on the underlying asset with payoff structures implemented using synthetic derivatives. RiskOFF is designed to reduce drawdowns, sacrificing upside beyond a cap; RiskON is designed to capture more upside. Together, RiskON + RiskOFF always add back up to the value of the underlying asset, as the value is simply redistributed to RiskON and RiskOFF according to the payoff formula. We have designed several types of SMART Tokens; the RiskON/RiskOFF pair are one type of SMART Token and what we initially launch with.
What do you mean by “risk tokenization” and “trading risk”?
Instead of only trading the underlying coin, we separate its risk into different buckets and turn each bucket into an ERC-20/ERC-4626 compatible token. You can then trade these buckets directly: sell downside, buy upside, or sit in a cushioned profile, all by moving between SMART Tokens rather than building your own derivatives structures.
How do you create a secondary market for these SMART Tokens?
For SMART Tokens to be genuinely useful, you need to be able to get in and out of positions at fair prices, which means deep, continuous secondary markets. TRP is shipping with its own internal DEX where RiskON, RiskOFF, and the underlying assets trade against each other in dedicated pools, so you do not have to rely on external venues for basic liquidity. We will bootstrap and deepen these pools by aligning incentives for LPs: they earn trading fees from SMART Token flow, and, on top of that, we will direct protocol incentives to the key pairs so that it is attractive to park capital there. LPs also benefit from dynamic fees–we scale fees up or down based on underlying volatility. Over time, as usage grows, this internal DEX becomes the natural liquidity hub for the SMART Token ecosystem, with aggregators and other venues routing into it. We might supplement the DEX with market maker driven liquidity as well in the future.
Can I create customized SMART Tokens beyond RiskON/RiskOFF?
At launch, SMART Tokens will be curated by us to concentrate liquidity and to ensure parameters are fully collateralized and easy to understand. Over time, we plan to launch different types of SMART Tokens and eventually, more customisable paths where advanced users can create bespoke payoff designs that still pass our risk and collateral checks.
How does it work?
How does the basic mechanism work under the hood?
When you deposit an asset (say 1 BTC) into TRP, the protocol mints a pair of SMART Tokens: 1 RiskON BTC and 1 RiskOFF BTC, each starting with half the economic value of the deposit. Under the hood, the contracts set up a synthetic, fully collateralized costless options collar between these two tokens: RiskOFF is given a downside floor and an upside cap (implemented as a long down and out put plus a short call), and RiskON takes the exact opposite side of that deal, absorbing losses beyond the floor and receiving upside beyond the cap. The two tokens are therefore direct counterparts to each other in an internal “risk swap”, not to any external market-maker. A proprietary risk engine continuously values these embedded payoffs and publishes a Net Token Value for each token. At any time, 1 RiskON + 1 RiskOFF can be redeemed back into 1 unit of the underlying, which keeps their combined value anchored to the underlying asset. At the end of each epoch (or earlier in extreme market crashes), the system rebalances and resets a fresh 50/50 pair for the next period, so the protocol itself never takes directional market risk—only redistributes it between RiskON and RiskOFF holders. For further details on rebalancing, please visit “Rebalances” in protocol documentation.
What are Split, Swap, Redeem, and Liquidity in the dApp?
“Split” mints RiskON and RiskOFF from your underlying; “Swap” lets you trade between the underlying and any SMART Token or between SMART Tokens themselves via AMM pools; “Redeem” lets you burn a matched set of RiskON and RiskOFF to get back the underlying asset; and “Liquidity” allows you to deposit (or withdraw) into our liquidity pools (for example, RiskON/RiskOFF/BTC or RiskON/RiskOFF/ETH) so that traders have deep markets and you earn fees and incentives.
What are Epochs ?
Epochs are fixed, predefined time intervals during which a protocol applies a consistent set of rules, calculations, and state updates before recalculating for the next interval.
In the context of The Risk Protocol, an epoch is the period over which the risk profile of SMART Tokens is defined and enforced. For example, the cap and floor of RiskON and RiskOFF apply to returns over that specific epoch.
At the end of each epoch:
The settlement prices of RiskON and RiskOFF are calculated
The payoff logic embedded in the smart contracts is applied to determine how much of the underlying collateral each holder of RiskON and RiskOFF is entitled to
New caps and floors for RiskON and RiskOFF are set for the next epoch
New starting prices for RiskON and RiskOFF are established
All holders of RiskON and RiskOFF from the expiring epoch are seamlessly rolled into the corresponding tokens for the new epoch (no need for active management)
How does rebalancing work?
Simultaneously with the end of an Epoch, a new Epoch begins. New RiskON/RiskOFF tokens are created such that the embedded options again form a zero-cost collar at the new Epoch start price. Each trader's expiring token USD value is used to determine their holdings in the new tokens. The token balances are adjusted ("rebased") such that the trader's combined USD NTV in the new tokens equals their expiring USD NTV.
Specific details on the rebalancing mechanism along with illustrative examples can be found in “Rebalances” in protocol documentation.
Where do the SMART Tokens returns or yield come from?
There is no magic external yield. Returns come from how upside and downside in the underlying asset are shared between RiskON and RiskOFF. All SMART Tokens are fully collateralized; we are redistributing risk and return from the underlying asset, not creating yield from nowhere.
Can you walk through one numerical example of an up-only market?
Let’s assume a SMART Token design such that RiskOFF is capped at a +15% upside for the epoch (and in return gets downside protection beyond a -10% loss), and any upside beyond that goes to the benefit of RiskON. Start with 1 BTC at $100,000 and mint 2 SMART Tokens worth $50,000 each: one RiskOFF BTC and one RiskON BTC. If BTC finishes the epoch 30% higher at $130,000, the combined value of RiskON and RiskOFF must still sum to $130,000. We know that RiskOFF is capped at 15% = $57,500. The remainder, $72,500, is the value of RiskON which ends the epoch up 45%. Holding one SMART Token each is equivalent to simply holding BTC and it replicates the 30% move of spot BTC. Tilting more of your position into RiskON gives you a steeper payoff than BTC in a strong up-only environment, while tilting more into RiskOFF lets you stay in BTC but with a smoother, partially capped profile even when the market rips higher.
Can you walk through one numerical example of a sharp drawdown?
Continuing with the hypothetical example above, let’s assume that RiskOFF is designed such that it is cushioned beyond a -10% drop (with losses beyond that borne by RiskON). Again, start with 1 BTC at $100,000, split into $50,000 of RiskOFF BTC and $50,000 of RiskON BTC. Now assume BTC finishes the epoch 30% lower at $70,000. The pair still has to add up to $70,000. RiskOFF is designed to end the epoch down max -10% so it ends the period at $45,000. RiskOFF’s share of the downside beyond -10% is borne by RiskON. Since the two tokens are designed to add up to the underlying, RiskON’s value at the end of the period is $25,000 ($70,000 - $45,000) or down 50%. Holding one of each SMART Token again replicates the –30% move of spot BTC. A portfolio that is mostly in RiskOFF experiences something closer to a –10% drawdown instead of –30%, while a portfolio that leans into RiskON takes a leveraged hit. In both directions, TRP is simply redistributing a fully collateralized BTC stack between a defensive bucket and a leveraged bucket according to the payoff rules.
If I dynamically shifted between RiskON and RiskOFF, would I have outperformed holding just BTC or ETH?
The answer depends on a) how frequently you shifted between RiskON/RiskOFF (e.g. every week, month or quarter) and b) your success in picking the right token for a particular period. With perfect hindsight and timing, dynamically switching between RiskON and RiskOFF would have massively outperformed passive BTC/ETH in our backtests. For BTC, a scenario where you picked the right token every month (i.e. rotating across RiskON/RiskOFF at the end of each month) would have turned:
A 69% increase in BTC into a 213% increase for the dynamic strategy over the last 1 year (about 3X spot)
A 480% increase in BTC into a 5,100% increase for the dynamic strategy over 3 years (about 11X spot)
A 763% increase in BTC into a 158,304% increase for the dynamic strategy over 5 years (about 208X spot)
For ETH, the same exercise turns:
A 76% increase in ETH into a 614% increase for the dynamic strategy over the last 1 year (8X spot)
A 183% increase in ETH into a 4,839% increase for the dynamic strategy over the last 3 years (26X spot),
A 1,069% increase in ETH into a 1,063,416% increase for the dynamic strategy over the last 5 years (995X spot)
Now, of course no one will trade perfectly in reality, but the sheer magnitude of the outperformance possible by rotating into the right token for a particular period indicates the alpha potential of such a dynamic strategy, even for lower levels of token selection accuracy.
Can a token go to zero or even negative?
A SMART Token’s payoff cannot go negative. Each RiskON/RiskOFF token is a fully collateralized claim on the underlying, so its on-chain payoff has a floor at zero—you can lose your stake, but you never owe more than what you put in. In extreme crashes, the RiskON token is intentionally the shock absorber. It can be written down to near-zero (for example, for a token design that has a -10% strike for the put, in a ~55% intra-epoch crash, RiskON may be taken to pennies so that RiskOFF’s put protection is made whole), but it still does not go negative.
Utility and Benefits
Why should I care about SMART Tokens as a BTC/ETH holder?
Because SMART Tokens let you turn a blunt spot position into two precise tools instead of one all-or-nothing bet. With RiskOFF BTC/ETH, you can park most of your stack in a cushioned profile that is designed to soften big drawdowns while still keeping meaningful upside, so your core holdings ride the cycle without getting smashed by every 30–40% dip. With RiskON BTC/ETH, you can concentrate risk and upside into a smaller slice of your capital, effectively “leveraging your conviction” without managing margin, liquidations, or options rolls. Together, they let you stay in BTC/ETH the whole time, but decide how much of your exposure lives in a defensive bucket and how much lives in a high-octane, upside-heavy bucket as market conditions and your views change. RiskON & RiskOFF are designed to be used tactically as your risk mode changes from risk-on to risk-off or vice versa. In fact dynamically shifting between RiskON & RiskOFF can dramatically boost your returns vs just holding the underlying BTC or ETH.
How do SMART Tokens help me reduce drawdowns?
Imagine BTC starts an epoch at $100,000 and you deposit 1 BTC to mint 2 SMART Tokens, each worth $50,000: RiskOFF and RiskON. You then sell your RiskON so that you are holding only RiskOFF. Suppose now BTC falls 40% to $60,000. In an illustrative design where RiskOFF is cushioned beyond a 10% loss, RiskOFF will end the epoch at $45,000 (–10%), while RiskON takes the remaining pain and ends around $15,000 (–70%); together, they still add to $60,000. If you had held spot BTC, you would be down 40%; by holding RiskOFF, you have obtained downside protection by shifting most of the downside to RiskON instead.
How do SMART Tokens help me take a high-conviction bullish view?
Using the same starting point—1 BTC at $100,000 split into $50,000 RiskOFF and $50,000 RiskON—suppose BTC rallies 50% to $150,000. In an illustrative design where upside above +15% is redirected to RiskON, RiskOFF will end at $57,500 (+15%) while RiskON will end at $92,500 (+85%). Again, the two add to $150,000, but most of the upside has been transferred to RiskON. If you are bullish, you can swap your RiskOFF or BTC for RiskON in order to tilt your portfolio towards that leveraged upside.
What’s the utility of TRP from the perspective of a lending platform?
Lenders want collateral that is stable, predictable, and unlikely to blow up during market stress. TRP’s RiskOFF tokens give them exactly that:
Lower volatility than BTC/ETH
Fully collateralized, on-chain, transparent payoff structure
No hidden leverage or oracle dependencies
Reduced risk of cascading liquidations
The net benefit is that lending platforms can safely raise LTVs or reduce liquidation thresholds, which leads to higher utilization, more borrows and more fees. Fewer liquidation failures = safer lending markets = higher TVL without more risk.
This makes RiskOFF a fundamentally superior version of collateral for lending protocols.
How would a DAO or treasury use TRP in practice?
Take a DAO with 100 BTC in its treasury. Instead of holding raw BTC, it could allocate the entire stack into RiskOFF BTC, parking its core reserves in a cushioned profile that softens large drawdowns while still keeping some upside. The complementary RiskON leg is effectively sold to market participants who want leveraged upside, so the DAO ends up holding only RiskOFF BTC as its treasury asset. This way, if macro turns ugly, the treasury is equipped to ride out the BTC volatility, without needing to negotiate bespoke structured notes or maintain an active derivatives book.
How is this better than just moving into stablecoins or trading perps/options?
Moving everything into stablecoins kills your upside and forces you to time re-entry. Perps provide leverage, but users’ funds are subject to margin calls and automatic liquidations. Perps also give you linear exposure—gains and losses increase in a straight line as prices move—so you can scale risk up or down, but you cannot change how the position behaves in different market conditions.
Options allow more flexible, non-linear payoffs, but they require active management, rolling, margin, specialized expertise and are subject to counterparty risk. TRP bakes these sophisticated, non-linear risk profiles directly into simple, fully collateralized, non-custodial, tradeable payoffs: instead of managing a derivatives book, you select the SMART Token that matches your risk view and hold it.
Who is it for?
Who is the target user for RiskON/RiskOFF?
RiskON/RiskOFF is built for a broad range of users: crypto-native traders and alpha hunters who want clean, on-chain ways to flip between risk-on and risk-off for maximal gains; longer-term BTC/ETH holders who wish to stay in their preferred asset but hate big drawdowns; lending platforms looking for lower-risk, more efficient collateral; DAOs and on-chain treasuries that need systematic, rule-based risk buckets instead of all-or-nothing exposure; and institutions—such as funds, market makers, and family offices—seeking fully collateralized, transparent payoffs they can plug into portfolios, products, or treasury stacks without building the derivatives machinery themselves.
Do I need expertise in derivatives to use TRP?
No. TRP abstracts away the options and structured-product complexity under the hood, and showcases only simplified SMART Tokens on the surface. You never have to pick strikes, expiries, margin, or worry about Greeks—you just choose between clearly illustrated payoff profiles, then split, swap, provide liquidity, or redeem. If you can think in terms of “more cushioned BTC/ETH” versus “more aggressive BTC/ETH”, you already have the right mental model; the derivatives machinery and risk engine simply ensure those profiles stay fully collateralized and behave as advertised.
Is TRP suitable only for short-term traders or also for long-term holders?
It works for both. Traders can actively rotate between RiskON and RiskOFF within and across epochs. At the same time, long-term holders can maintain a preferred profile (for example, RiskOFF BTC or ETH) for multiple epochs to smooth the ride without having to leave their BTC or ETH holdings. It should be noted that while RiskOFF is a suitable long-term investment, RiskON is better held for shorter periods while switching between risk regimes.
Differentiators
Is this the same as Pendle or yield tokenization protocols?
No–Pendle tokenizes yield. The Risk Protocol tokenizes risk. Pendle and similar protocols split a yield-bearing position into a principal token and a yield token, so you are mainly trading interest-rate exposure and maximizing APY. The underlying asset must produce yield for Pendle to work.
TRP on the other hand splits market risk itself—primarily price volatility—into two tradable buckets or “risk flavors”:
RiskOFF: dampened volatility, drawdown protection, low-risk exposure
RiskON: leveraged volatility exposure, convex upside during high-vol markets
TRP does not need the underlying token to be yield producing.
How are TRP’s SMART Tokens different from other derivative instruments?
TRP offers a new primitive, not another derivative instrument: With a derivative, you bet about an asset. With TRP, you hold a transformed version of the asset itself. A primitive behaves like a simple asset you own, not a contract you must maintain and monitor. It can be:
Sent
Traded
Used as collateral
Composed into other protocols
LP’d or staked in DeFi
Most options and perp platforms (Deribits, GMX, Hyperliquid, Synthetix etc.) on the other hand, expose positions that are:
Account-based, not tokenized
Dependent on margin and liquidation engines
Non-transferable
Not ERC-20 assets
How are TRP’s SMART Tokens different from perps?
Unique Risk Profile: Perps give you linear leverage with funding-rate risk and liquidations. TRP’s SMART Tokens on the other hand provide non-linear exposure with the ability to “bend” the risk/return profile of the underlying. There are no liquidations, no funding-rate payments, and no margin management. You’re holding a fully collateralized payoff that automatically adjusts to market volatility. Instead of managing leverage, you select a risk flavor (RiskON or RiskOFF) and hold it like any other token.
Portability: Because perp positions live inside the protocol’s accounting system, they cannot be moved, cannot be used as collateral elsewhere, and cannot be LP’d or staked like a simple token. Perps aren’t composable across DeFi and in most cases they come with all the risks inherent in offchain centralized liquidity venues.
Costs: Perpetuals also have ongoing funding rate costs and these rates can eat into your returns significantly—we are talking high single-digit to low double-digit annualised percentages in many cases. Our SMART Tokens are structured as what's called a "costless collar" under the hood. What that means is that neither one of them pays any premium to the other - the cost is zero. Essentially, RiskOFF is given downside protection (a synthetic put) and gives up upside beyond a cap (a synthetic short call), while RiskON takes the opposite side of that trade. There's no continuous funding bleed—it's a one-time split where RiskON and RiskOFF are direct counterparties to each other in an internal risk swap, not paying rolling interest to maintain their positions.
Trading Vol: One can’t really use perps to trade volatility. Perps are linear payoffs and directional -- you have to choose direction. You can get high leverage but you have to bet direction and you get liquidated if you guess wrong. Our tokens on the other hand allow you to trade volatility irrespective of direction -- if you are long vol, as long as crypto swings up or down, your position makes a profit. In fact long vol/short vol is a specific type of SMART Token that we will be offering post launch.
Designed for both traders and non-traders: Finally, TRP products don’t require a derivatives background. They behave like simple tokens you can hold in a wallet, LP into, use as collateral, or integrate into other DeFi protocols’ structured strategies—without ever touching an options chain or perp exchange.
How are TRP’s SMART Tokens different from options?
Options are powerful but complex—implied vols, Greeks, expiries, strikes, premium decay etc. TRP abstracts away all of that. No constructing various option legs, no rolling positions. You simply choose the level of risk you want, and the protocol handles the mechanics behind the scenes. As a result, SMART Tokens democratize access and expand the market of derivative users in crypto.
How are SMART Tokens different from leveraged tokens?
Leveraged tokens are good for daily bets but suffer from volatility decay if held for longer periods. Whereas leveraged tokens suffer from volatility, our Smart Tokens are actually built around volatility. Plus we can create smart tokens over any duration–1 week, 1 month, 1 quarter etc.
What do you mean when you say crypto lacks risk infrastructure, and what space does TRP occupy?
Traditional markets have a rich ecosystem of risk products: volatility futures & options, volatility ETNs and ETFs, volatility indices, defined outcome ETFs, tail-risk hedging, risk parity strategies, structured products, hedging overlays etc. Crypto mostly offers spot and perps, with only pockets of structured risk solutions. TRP is building a native on-chain risk layer: programmable ways to isolate, measure, transfer, and warehouse risk that can plug into wallets, treasuries, protocols, and exchanges as a core primitive.
Safety & Risks
Who is building TRP?
We are a small team that blends deep crypto-native experience with decades of institutional finance expertise. Our team members bring highly specialized backgrounds in DeFi and CeFi protocol design, GTM strategy, quantitative trading, risk management, derivatives structuring and valuation and volatility modeling and research.
Unlike the $4T+ risk market in traditional finance, the team understands that there is a large market gap in decentralized finance, and is therefore committed to developing an on-chain risk market in crypto. Learn more under “Our Story” here: https://www.riskprotocol.io/about
We are supported by senior advisers across risk, trading, engineering, and protocol design & architecture, and we intend to progressively hand more control to the community as governance and the product set mature.
How do the smart contracts, upgrades, and multisig work? Are my funds safe?
The Risk Protocol is implemented entirely through on-chain smart contracts that enforce predefined, transparent rules. These contracts control how collateral is locked, how SMART Tokens are minted and redeemed, how rebalancing occurs, and how liquidity pools function.
At launch, some core contracts will remain upgradeable for a limited period. This is intentional: TRP is introducing new primitives for on-chain risk transfer, and upgradeability allows us to fix bugs, respond to edge cases, or refine parameters if something does not behave as intended in real market conditions.
Upgrades and other sensitive protocol actions are governed by a multisig, composed of a mix of core TRP contributors and independent third parties with aligned incentives. This structure prevents unilateral control by any single actor, including the TRP team itself.
Once the system has been sufficiently battle-tested and we are confident in its long-term behavior, the protocol is designed to transition toward immutable contracts and increasingly on-chain governance, reducing trust assumptions over time.
At all times, user funds remain governed by smart-contract rules rather than human discretion.
Who actually holds my BTC/ETH when I deposit collateral?
No one takes custody of your funds.
When you deposit BTC or ETH into The Risk Protocol, your assets are locked into on-chain smart contracts. These contracts enforce the rules for minting, trading, rebalancing, and redeeming SMART Tokens. Neither TRP nor any third party can arbitrarily move, freeze, or access your assets.
Your wallet receives SMART Tokens that represent your fully collateralized, on-chain claim on the underlying collateral. Redemption is available anytime and always governed by transparent protocol logic.
What are the main smart contracts involved, and who controls them?
Vault: The Vault is responsible for locking and unlocking collateral. When you deposit e.g. BTC or ETH, ownership of the underlying asset is transferred to the Vault contract according to fixed rules. No funds are held in discretionary custody. When the required SMART Tokens are redeemed, the Vault releases the corresponding collateral back to the user.
RiskON: The RiskON contract is an ERC-20/ERC-4626 compatible token contract that tracks ownership of RiskON SMART Tokens. It is open source and rule-based and does not grant special privileges to TRP or any other party.
RiskOFF: The RiskOFF contract mirrors RiskON in structure and permissions. It is also ERC-20/ERC-4626 compatible, open source, and governed entirely by its code.
TRP authors the code but does not have discretionary control over these contracts. All interactions—including those by TRP—are subject to the same rules as any other user.
Is my collateral rehypothecated, lent out, or used elsewhere?
No. Your collateral is not rehypothecated or lent out. To increase utility to users and facilitate arbitrage, the protocol may allow atomic flashloans of the SMART Tokens, which must be repaid within the same transaction or the transaction fails. These flashloans do not introduce counterparty risk and do not affect users’ ability to redeem their assets at any time. See “Trading Bots” section in protocol documentation for more details.
What risks still exist even if you don’t custody funds?
Removing custody eliminates a major class of risk, but some risks remain in theory including:
Smart contract risk: Bugs or vulnerabilities could cause unintended behavior and/or exploits by hackers, even after rigorous audits.
Market risk: RiskON and RiskOFF deliberately redistribute market risk. Choosing the wrong exposure for a given market regime can result in losses.
Liquidity risk: In extreme conditions, secondary market liquidity may be thinner, increasing slippage.
These risks are transparent, on-chain, and opt-in.
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Who am I actually trusting when I use this protocol?
You are not trusting a company, broker, or intermediary. You are interacting directly with on-chain, fully open-sourced smart contracts that operate according to predefined, transparent rules.
Once deployed, these contracts execute automatically and cannot make discretionary decisions. The protocol does not take custody of funds, approve transactions, or intervene in user positions.
Do I still own my assets after I use the platform?
Yes. You retain full economic ownership of your assets at all times.
When you deposit collateral, it is locked into a smart contract and represented by on-chain tokens that belong to your wallet. The protocol cannot access, move, or reuse your assets outside of the rules you explicitly agree to.
Can the platform freeze, block, or reverse my transactions?
No. The Risk Protocol is permissionless. It cannot freeze accounts, block users, or reverse transactions. Once a transaction is confirmed on-chain, it is final and enforced by the blockchain itself.
If something goes wrong, who is responsible?
Unlike centralized platforms, decentralized finance (“DeFi”) protocols do not provide guarantees, refunds, or discretionary intervention. This is the norm and best practice in DeFi.
Users are responsible for understanding how the protocol works and the risks they choose to take. These risks—such as smart-contract risk or market risk—are transparent, predefined, and opt-in, rather than hidden or discretionary.
Why would someone choose this over a centralized platform?
DeFi offers transparency, predictability, and user control. There is no custody of user assets, no hidden leverage, no off-balance-sheet activity, and no discretionary decision-making. All rules are visible on-chain and apply equally to all users.
For many users, this trade-off—more control and transparency in exchange for greater personal responsibility—is the core value of DeFi.
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