Risk Disclosures

Risks of using the Lien system

While we took every precaution to make the Lien system safe for everyone to use, we need to emphasize that using the Lien system does come with risks.

Some risks are systematic in that they are not specifically related to Lien, but to the whole financial system or geopolitical situation.

Some risks are non-systematic in that they are specifically related to Lien.

We cannot do anything about systematic risks as they are out of our control.
But we can and have taken measures to minimize non-systematic risks as much as possible.

Here are some of the examples of the actions that we took:

Audits

Lien smart contracts were audited not by one firm, but by two firms that are well known and trusted in the industry.

The first audit was performed by Consensys Diligence.

Here is the link to their audit report.
https://diligence.consensys.net/audits/2020/05/lien-protocol/

All comments that were raised during the audit were addressed to the satisfaction of the audit team.

The second audit was performed by CertiK.

Here is the link to their audit report.
https://certificate.certik.org/reports/lien_finance.pdf

As with the Consensys Diligence audit, all comments that were raised during the second audit were also addressed to the satisfaction of the audit team.

The code that has been deployed to the Ethereum mainnet is the same code that has been audited and no changes or additions have been made since the audit.

We feel that code audits are very important in assessing the validity and security of the code.

However, audits do not eliminate risks completely and users of Lien should verify the integrity of the code for themselves. The code is open sourced for anyone to review.

Don’t trust us, verify the code.

Admin Keys

There are no Admin keys in the Lien smart contracts that were deployed to the Ethereum mainnet.

This means that the code cannot be altered by anyone after launch.

A malicious actor, or anyone for that matter, cannot alter or introduce any bugs into the code.

Testnet for users to practice

Before users spend real assets on the mainnet version of Lien, they are encouraged to play around with the testnet version on the Ropsten network.

Practice may not make perfect, but it will significantly decrease the risk of costly mistakes when performed using actual funds.

Risks to be aware of

Devaluation of iDOL

iDOL is designed to efficiently achieve stability against the US dollar.
However, in times of significant volatility and decrease in the price of ETH, market mechanisms could temporarily break down causing instability in the price of iDOL.
Lien has mechanisms in place to mitigate such situations (such as emergency auctions). However, under situations where market mechanisms fail to function, iDOL could face devaluation.

Devaluation of the Lien token

The Lien token has a fixed supply of 1,000,000 LIEN, which will never increase.
Never.

However, users of the Lien token should not expect the price of the Lien token to go up.

Users of the Lien token should not expect any returns from holding the Lien token.

The Lien Token (LIEN) is a utility token that the holders can use to receive discounts on the protocol fees that are required when using the Lien Protocol and trading on FairSwap.

Oracle Risk

The Lien Protocol relies on price feeds from external sources in maintaining the stability of the price of iDOL.
We carefully deliberated different solutions that were available at the time the Lien Protocol was being developed and ultimately decided on using Chainlink for the price oracle.
Chainlink is one of the most widely used oracle solutions in the industry, known for its robust and reliable data feeds.
You can learn more about Chainlink in the link below:
https://chain.link
However, under unexpected circumstances where the data feeds from Chainlink cannot be relied upon, the Lien Protocol will fail to function as intended.
There is a counter measure that is built into the code in case of such emergency situations, which is outlined in our whitepaper, “Parameter Tuning in the Lien protocol”.