Risk Documentation

Spectra employs top-tier security measures. However, users should still be mindful of certain risks associated with using the Spectra Protocol & Flagship App.

By using the Spectra Protocol & Spectra App, you accept the associated risks.

This section outlines various risk categories for using the Spectra Protocol & Spectra App.

Please be aware that this list is not comprehensive and may not capture all possible risks you may encounter.

Smart Contract Risk

There exists the inherent risk that the protocol's smart contracts might contain vulnerabilities or bugs, potentially leading to unforeseen issues.

Several security measures are in place to mitigate this risk:

  • The Spectra code base is public-sourced

  • The code has been audited by the Pashov Audit Group and 42 security researchers of Code4rena who collectively reported 0 high-risk findings

More details on Spectra's audits are here.

AMM Risk

Spectra is AMM-agnostic, meaning it uses external infrastructure providers to power its pools. Initially, Spectra leverages battle-tested Curve AMM. Curve has been audited numerous times since its inception in February 2020, however, a risk of vulnerability or a bug always exists.

Counterparty risk

Before supplying liquidity or obtaining yield derivatives, conducting due diligence on the projects that emit the underlying or the interest-bearing token is crucial. Spectra Protocol does not have control over the types of tokens that users decide to contribute to its pools. Therefore, it's essential to understand the source and stability of these tokens, as their inherent risks and performance are outside Spectra's oversight.

Negative Yield risk

It is possible that ERC-4626 interest-bearing tokens (IBTs) may experience a decrease in their underlying share value. In such cases, the underlying backing of Principal Tokens (PTs) will decrease proportionally to maintain the protocol's solvency. This is the inverse of the share value increasing, which would result in yield that Yield Token (YT) holders could claim. Negative yield events reduce the amount of underlying assets backing each PT, impacting the value PT holders can redeem at maturity.

Interface risk

Spectra's flagship app (https://app.spectra.finance) relays data from the Spectra Protocol and presents it in a humanly understandable way. Although it was built with best practices in mind, it is not immune to internal or external bugs caused, for example, by the user's browser extensions. If you think there's an issue with Spectra's App, please report it via Spectra's official discord channel.

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