Risk Overview

Before using our yield strategies, it’s important to understand the potential risks:

Smart‑Contract Risk: Code vulnerabilities in any integrated protocol.
Market Risk: Price swings that devalue collateral or vault tokens.
Liquidation Risk: Leveraged legs can be forcibly closed if collateral falls.
Stablecoin De‑Peg: Over‑collateralised stables may not redeem 1:1 in a bank run.
Counterparty Risk: Failure of off‑chain or oracle services that feed data on‑chain.
Operational Risk: Downtime in our rebalancing bots or governance failures.

Always size positions according to personal risk tolerance. Past performance ≠ future returns.

Enhanced Risk Disclosure

Below is a more granular view of the risks already listed, plus the specific ways Axal AutoYield attempts to mitigate them. Use this to decide whether a given tier matches your personal risk budget.

Risk Category	Description	Who/What is Exposed?	Mitigation at Axal
Smart‑Contract & Protocol Risk	Bugs or economic exploits in any integrated protocol (Aave, Morpho, Kamino, HyperEVM, Felix).	All tiers (severity rises with Aggressive).	‑ Curated where protocol requires at least two independent audits per contract;
Third‑Party Integration Risk	Failures in routers, bridges, relayers, or any other external services our strategies tap into.	Primarily Balanced & Aggressive.	‑ Prefer “battle‑tested” adapters; ‑ Circuit‑breaker that pauses deposits if an adapter reverts beyond a set threshold.
Counterparty & Custody Risk	Losses arising from another entity having control over user funds or recovery keys.	Minimal for all tiers (Axal is non‑custodial).	‑ Privy self‑custodial wallets; ‑ Session keys limited in scope/time; ‑ No Axal or relayer signing rights; ‑ 3‑of‑5 Emergency Council can only pause contracts, never move user funds.
Market & Liquidity Risk	Volatility or thin liquidity may drive collateral prices below safety thresholds, causing liquidations or impermanent loss.	Balanced & Aggressive (Conservative protected by blue‑chip and stables).	‑ Auto‑Deleverage if LTV > 70%; ‑ Multi‑stable distribution (USDC/USDT/DAI) in Conservative vaults.
Stablecoin De‑Peg Risk	Over‑collateralised stables (feUSD, USDXL) lose their dollar peg during a bank run.	Balanced.	‑ Hard caps per stablecoin; ‑ Peg‑watch oracle that forces a strategy pause if deviation > 3%.
Oracle/Data Risk	Bad price feeds can trigger false liquidations or erroneous rebalances.	All tiers.	‑ Multiple oracle sources (Chainlink, Pyth, on‑chain TWAP) with medianisation.
Execution & Automation Risk	Downtime in our rebalancer or MEV front‑running can widen slippage.	Mostly Aggressive.	‑ Redundant keeper network in three regions; ‑ Transactions sent with MEV‑blocker relay.
Regulatory/Policy Risk	Changing rules around DeFi, leverage, or stablecoins could affect access or taxation.	All tiers.	‑ Geofencing where legally required; ‑ Regular counsel review of new regulations.
Systemic / Chain Risk	L1/L2 outage, consensus failure, or cross‑chain bridge hack causes widespread contagion.	All tiers.	‑ Diversified chain exposure; ‑ Rapid exit scripts for conservative assets;

Risk‑by‑Tier Heat Map

Tier	Smart‑Contract	Counter‑party	Market/Price	Liquidation	Oracle	Systemic
Conservative	🟢 Minimal	🟢 Minimal	🟢 Minimal	🟢 Minimal	🟢 Minimal	🟢 Minimal
Balanced	🟡 Medium	🟢 Minimal	🟡 Medium	🟡 Medium	🟡 Medium	🟢 Minimal
Aggressive	🔴 High	🟢 Minimal	🔴 High	🔴 High	🔴 High	🟢 Minimal

How You Can Mitigate Risk Personally

Size sensibly: Never allocate funds you cannot afford to lose.
Diversify tiers: Split capital across Conservative, Balanced, and Aggressive instead of going “all‑in” on one.
Review session keys: Revoke or shorten session‑key duration if you won’t be actively monitoring.
Monitor dashboards: Enable push or email alerts for LTV and peg deviations (coming soon).
Stay informed: Follow our Transparency Hub and Discord for audit reports, incident updates, and governance changes.