Risks And Disclaimers
Last updated
Last updated
The website (“Website”) is operated by or on behalf Layken Limited (“Company”, “we” or “us”) and provides a user interface for the Increment protocol (whether the mainnet or testnet version) (the “Protocol”). The Protocol is an open source protocol that enables on-chain perpetual swaps, as further described in the documentation available at (“Documentation”). Before accessing the Protocol, you should review the Documentation and our Terms of Service available at . In the event of any conflict between these Risks and Disclaimers and our Terms of Service, our Terms of Service will supersede and control.
Use of the Protocol, as with any decentralized finance application, entails certain risks. We have provided a list of some of the risks associated with the Protocol; however, the following discussion is not an exhaustive list of the risks associated with the Protocol and does not necessarily reflect the relative importance of the various risks. You should review the Documentation and the Terms of Service carefully and consult with your advisers before using the Protocol.
You should never trade or invest with funds that you can't afford to lose.
Risks associated with Cryptocurrencies
AS WITH ANY ASSET, THE VALUES OF CRYPTOCURRENCIES, DIGITAL ASSETS, TOKENS OR SECURITIES (“CRYPTOCURRENCIES”) ARE VOLATILE AND MAY FLUCTUATE SIGNIFICANTLY AND THERE IS A SUBSTANTIAL RISK OF ECONOMIC LOSS WHEN PURCHASING, HOLDING OR INVESTING IN CRYPTOCURRENCIES. BY ACCESSING THE WEBSITE AND USING OUR SERVICES, YOU ACKNOWLEDGE AND AGREE THAT: (A) YOU ARE AWARE OF THE RISKS ASSOCIATED WITH TRANSACTIONS IN CRYPTOCURRENCIES THAT ARE BASED ON BLOCKCHAIN AND CRYPTOGRAPHY TECHNOLOGIES AND ARE ISSUED AND MANAGED IN A DECENTRALIZED FORM; (B) YOU ASSUME ALL RISKS RELATED TO THE USE OF THIS WEBSITE AND TRANSACTIONS IN CRYPTOCURRENCIES USING THE PROTOCOL; AND (C) THE COMPANY SHALL NOT BE LIABLE FOR ANY LOSS OR ADVERSE OUTCOMES IN CONNECTION WITH YOUR USE OF THE WEBSITE OR CRYPTOCURRENCY TRANSACTIONS ON THE PROTOCOL.
Cryptocurrencies are neither (i) deposits of or guaranteed by a bank nor (ii) insured by the FDIC or by any other governmental agency.
The regulatory regime governing blockchain technologies and cryptocurrencies is uncertain, and new regulations or policies may materially adversely affect the potential utility or value of such cryptocurrencies and digital assets. There also exists the risks of new taxation of the purchase or sale of cryptocurrencies. All of the foregoing may result in volatility of cryptocurrency prices.
You should conduct your own due diligence of any cryptocurrencies, and the developers or issuers behind those cryptocurrencies, and consult your advisors prior to making any investment decision. You are solely responsible for determining whether any investment, investment strategy or related transaction is appropriate for you according to your personal investment objectives, financial circumstances and risk tolerance, and you shall be solely responsible for any loss or liability therefrom. You should consult legal or tax professionals regarding your specific situation.
We cannot control how third-party exchange platforms quote or value cryptocurrencies and other digital assets and we expressly deny and disclaim any liability to you and deny any obligations to indemnify or hold you harmless for any losses you may incur as a result of fluctuations in the value of cryptocurrencies.
The Protocol is a purely non-custodial application, meaning we do not ever have custody, possession, or control of your cryptocurrencies at any time. Thus, you are solely responsible for the custody of the cryptographic private keys to the wallets you hold and you should never share your wallet credentials or seed phrase with anyone. We accept no responsibility for, or liability to you, in connection with your use of any wallet and make no representations or warranties regarding how the Interface or the Protocol will operate with any specific wallet. Likewise, you are solely responsible for any associated wallet and we are not liable for any acts or omissions by you in connection with or as a result of your wallet being compromised.
We do not recommend whether any particular cryptocurrencies should be bought, earned, sold, swapped or held by you and we will not be held responsible for the decisions you make based on the information provided by us on this Website.
Risks associated with Blockchain Protocols and Smart Contracts
By using the Website, you represent that you have sufficient knowledge and experience in business and financial matters, including a sufficient understanding of blockchain technologies, cryptocurrencies, storage mechanisms (such as wallets), distributed computing, and blockchain-based software systems to be able to assess and evaluate the risks and benefits of use of the Protocol, and that you are able to bear the risks of using the Protocol including a complete loss of any funds transacted by you using the Protocol and the risk that any cryptocurrencies in which you transaction may lose all value. You acknowledge and agree that there are risks associated with using distributed protocols. We do not operate, run or deploy the Protocol. Instead, the Protocol is operated on a distributed basis by other users of the Protocol. The Protocol is subject to change, as determined by the Protocol’s governance mechanism, and we are not responsible for any changes in the Protocol or any resulting incompatibility between the Interface and the Protocol.
We do not have control over users of the Protocol, which may be accessed through means other than the Interface, and you hereby assume the risks of interacting with such users.
Smart contracts execute automatically when certain conditions are met. We do not have the ability to reverse a transaction that is recorded on a public blockchain. You are responsible for ensuring that any details entered you enter in connection with a transaction using any smart contracts are accurate and complete. We are not responsible for any losses due to your errors, including an incorrectly constructed transaction.
All smart contracts are subject to risks. The Increment contracts have undergone testing, code reviews, internal audits and several external audits, but it is possible that they may still contain unknown bugs and produce economic errors that are inherently unforeseeable. Further, since smart contracts cannot be stopped or reversed, vulnerabilities in their programming and design or other vulnerabilities that may arise due to hacking or other security incidents may lead to irreversible losses.
You acknowledge that there are inherent risks associated with using or interacting with public blockchains and distributed technology. There is no guarantee that the Protocol will continue to be available or that the Protocol will not be subject to errors, hacking or other security risks. The Protocol may also be subject to changes in operating rules, including forks, and it is your responsibility to make yourself aware of upcoming operating changes. We do not control the Protocol and are not responsible for changes in its functionality.
In addition, we do not warrant that this Website will meet your needs, or that it will be uninterrupted, timely, secure or error-free, that defects will be corrected, or that this Website or the server that makes it available are free of viruses or other harmful components. However, the Protocol will continue to operate even if the Interface is not available. Any funds deposited by you in the smart contracts associated with the Protocol will remain in those smart contracts, even if you are unable to access them through the Interface.
In certain cases, your transactions through the Services may not be successful due to an error with the Protocol, the Interface or your wallet. We accept no responsibility or liability to you for any such failed transactions, or any transaction or gas fees that may be incurred by you in connection with such failed transactions.
Additional Risk Factors
Risks Associated with Smart Contracts
Economic Risks
Liquidity
The protocol relies on liquidity providers to bring real collateral in order to mint virtual tokens to the Curve pool. Without enough liquidity remaining, traders may encounter issues when opening/closing positions, liquidations may become infeasible, and liquidity providers might be unable to close uneven positions.
Slippage
Unrealized PnL currently does not take slippage into account, so large positions can generate bad debt during liquidation. The Increment protocol limits the maximum position size that a single address can open, however, traders should be aware of this when taking positions with multiple addresses.
TWAP
The Increment protocol uses TWAP oracles for input validation of closing positions and liquidations. Manipulating TWAPs is more difficult than manipulating a spot price, but they can be tampered with if given sufficient financial resources. In addition, because TWAP is time-based, it could become out of sync with the markets during times of high volatility. Finally, because TWAP is generated from the protocol itself, it does not take into account prices on other exchanges and thus could become out of sync with the broader market.
Governance
Tokenholders will have the ability to vote on many aspects of the operation of the Increment protocol, from selecting the price oracle to allowing new trading pairs or tokens to the list of permitted collateral. There can be no assurance that that tokenholders will make decisions that provide the best outcome for traders.
In addition, there will be an “Emergency Admin” address controlled by a multisig made up of several core contributors and stakeholders of the Increment protocol. The Emergency Admin will be able to pause or unpause the entire Increment protocol. Implementation of the pausing function could be detrimental to user positions in case of price fluctuations. Pausing the protocol should only occur under extremely critical circumstances, such as if a hack were to occur.
Dependencies
Curve factory
As noted above, the Increment protocol relies on certain third-party smart contracts, which can be changed by the governance mechanisms of those contracts. In particular, Curve’s CryptoSwap powers our AMM. The admin (0x82561F43aEC744C076E2901d3fE23bfB8B03aD4d) of the curve factory (0x890b12affd59525e4f0273aF00Dcd9c4Ac7698C1) can change all parameters of the CryptoSwap contract. This changes the operation of the underlying trading engine impacting traders, liquidity providers and liquidators. Users of the Increment protocol may not have advance notice of changes in the CryptoSwap contract and this website may not be updated when such changes become effective.
Oracles
The Increment protocol currently uses Chainlink oracles to determine the funding rate of the protocol. When these oracles provide incorrect or delayed price information, the funding rates could be incorrectly estimated. In addition, liquidations may not be executed on time if oracle price updates too slowly or transactions are not processed. There can be no assurance that the current oracle or any oracle selected in the future will provide accurate information.
Reserve Assets
“UA” refers to “unit of account” by which transactions in the Increment protocol are denominated. Currently, one has to lock USDC to mint UA, in the same proportion. The protocol assumes a fixed price of 1 USD for each unit of UA. However, USDC is an upgradable contract where a native fee-on-transfer can be introduced. If such a mechanism is introduced, the Increment protocol would not longer be able to support USDC as the reserve asset due to accounting issues. For instance, if a 2 USDC fee is charged on every 10 USDC deposit onto Increment, the user should end up with 8 USDC but the protocol will see that as 10 USDC. In such a case the reserve asset will then need to be replaced with another asset.
The protocol might be changed through the governance process to allow other ERC20 tokens to be used as collaterals in the protocol – but while USDC’s value is almost completely static, the values of other tokens might change over time. To mitigate this risk, the Protocol includes a weight attached to collateral. The less stable the collateral, the lower its weight. This parameter may be changed by governance vote.
zkSync Era
For instance, if the sequencer on zkSync Era, which executes and batches L2 transactions, goes offline then Increment will become unusable and transactions will not go through. This can cause significant problems with oracle price updates and potential liquidations once the sequencer is back online. A sequencer oracle would detect potential sequencer downtimes and allow a grace period for users to react before updating oracle prices - however, so far there isn't a onchain sequencer oracle available for zkSync Era.
zkSync Era also offers a dedicated compiler responsible for transforming conventional Solidity and Vyper code into zkEVM bytecode. While there is extensive test coverage to ensure EVM compatibility, issues may still appear which may adversely affect the functionality of the Increment protocol.
No Investment or Other Professional Advice
This Website and any information or materials contained in it do not constitute the distribution, an offer or solicitation of any kind to purchase or sell any product, security or instrument whatsoever nor should they be construed as providing any type of investment or other advice or recommendations by us, any of our affiliates or third parties to any person in any jurisdiction where such distribution, offer, solicitation, purchase or sale would be unlawful under the laws of such jurisdiction. Moreover, the Website does not include, and the Company does not give, investment advice, endorsement, analysis or recommendations with respect to any cryptocurrencies or provide any financial, tax, legal advice or other professional advice or services of any kind. We do not make any investment recommendations, and no communication, through this website or in any other medium, is intended as or should be construed as advice or recommendation for any cryptocurrencies offered on or off this website or any other sort of advice. You should not rely on the Website for any such advice. We are not your broker, intermediary, agent, or advisor and have no fiduciary relationship or obligation to you in connection with any trades or other decisions or activities effected by you using this website. No advice or information contained on the Website will create any warranty or representation.
All smart contracts are subject to risks. The Increment contracts have undergone testing, code reviews, internal audits and several external , but it is possible that they may still contain unknown bugs and produce economic errors that are inherently unforeseeable. In addition, the Increment contracts rely on certain third-party smart contracts. Although we believe these contracts to be reliable, they were not part of the audit and could contain errors.
The Increment protocol is built on , an Ethereum layer-2 protocol. A severe degradation in any part of this critical infrastructure will adversely affect the functionality of the Increment protocol.