# Risks ## Liquidation Risk If your Collateral Ratio falls under 110%, you will get liquidated. This means you can keep your (100%) DCHF but will lose your Collateral (109,99%). Furthermore, if the Protocol has a Total Collateral Ratio of under 150%, it enters Recovery Mode, all Positions with a Collateral of under 150% are subject of liquidation (riskiest positions get liquidated first). To mitigate this risk, make sure to always have a high Collateral Ratio. ## General DeFi Risks DeFi poses a wide range of risks, such as falling for fraud or having private access keys stolen, having your wallet emptied, etc. Therefore, DeFi users need to constantly educate themselves carefully and make sure that their computer does not contain malware. ## Centralization Risks The DCHF relies on oracles to determine the price of one CHF. This is a potential attack vector. To mitigate this risk, multiple oracles need to come to the same conclusion or the smart contract will be halted. ## Smart Contract Risks Smart contracts are a set of rules for how transactions should be executed on a blockchain. Such sets of rules (codes) may contain vulnerabilities that could be exploited by hackers and attackers. The DeFi Franc is a friendly Fork of the protocol [Liquity](https://www.liquity.org). They have had several audits, a big Bug Bounty and are battle tested with large TVLs. Nevertheless, the DeFi Franc has done some changes to the battletested protocol and might have introduced some bugs or possibilites of exploitation. ## General Rules of investing in DeFi 1. Do not risk too much. Rather buy more when something goes well 2. Be aware that the crypto market is not a one-way street and prices can also fall sharply. 3. Basically assume a long-term strategy and do not rely on the fact that you will make high profits in a short time. 4. Be aware that things can happen in crypto that can lead to a total loss (e.g. by hackers). The founders can have checked the security no matter how carefully. Criminals are becoming more and more inventive and may be able to crack even websites, platforms, DEXes and blockchains that are considered secure and steal from investors in the future. 5. Therefore, be aware that in crypto transactions there is no bank that will watch over your money and take responsibility for damages. You alone are responsible for your money! 6. Never use existentially threatening amounts of money, but only as much as you can handle in the worst case (total loss) without it destroying your life. 7. Note that in most countries profits from crypto transactions have to be taxed. ## LLama Risk Report The Curve DAO Risk Police has done an unbiased Risk Report of the DeFi Franc. You can read it here: {% embed url="" %} --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.defifranc.com/extras/risks.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.