Risks & Best Practises

Best Practices: Tips and precautions for users

Educate Before You Participate:

Always take the time to educate yourself about the protocol's functions, mechanisms, and underlying smart contracts. Familiarize yourself with the protocol's whitepaper, documentation, and any user guides available.

Maintain a Healthy Collateralization Ratio:

In protocols like Davos that use a Collateralized Debt Position (CDP) framework, always ensure that your collateral is maintained at a safe level above the minimum required. This prevents potential liquidations, especially during volatile market movements.

Stay Updated & Vigilant:

Follow the protocol's official channels (like Discord, Telegram, and Twitter) to keep abreast of updates, upgrades, or any potential issues. Always be wary of phishing attempts or fake announcements. Remember, the DeFi space can be rife with scams.

Diversify & Limit Exposure:

Never put all your assets in a single protocol or strategy. Diversifying across different platforms and strategies can help mitigate potential risks. Determine an investment threshold and avoid exceeding that limit, ensuring that even in a worst-case scenario, your losses are manageable.

Regularly Monitor & Rebalance:

With fluctuating APRs, TVL, and market conditions, the returns and risks in DeFi can change rapidly. Periodically review your investments, rebalance your portfolio if necessary, and ensure your positions align with your risk tolerance and financial goals.

Remember, while DeFi offers the potential for lucrative returns, it comes with its share of risks. Ensuring that you follow best practices can help in safeguarding your investments and optimizing your returns.

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