⏱️Risks
Caution should be exercised when interacting with any smart contract or blockchain application. While risks are attempted to be mitigated through testing, audits and bug bounties, there is always a risk of vulnerabilities in any smart contract code.
A non-exhaustive list of risks:
Pulsechain and RH Token Price Risk: The biggest risk is the overall success of Pulsechain both from a networking perspective (which we do not control) as well as an economic perspective (which we do not control).
Competition Risk: It is possible for other participants to enter the market and compete against us and win. In fact, we are not even the only GMX fork on Pulsechain.
Leverage Risk: Leverage is a useful tool if used correctly. Used incorrectly it will lead to liquidations. Never misuse leverage or you will end up like miniature version of 3 Arrows Capital. If you do not understand leverage we suggest studying it and starting very very small.
Liquidation Risk: When trades go against you you get liquidated. For every win on this protocol someone else is losing. It could be that you win for months just to lose it all in one day. It is best to use appropriate risk management and never go “All-In” on this or any other platform or token.
Concentration Risk: Hexicans are generally over concentrated in RH coins. Diversification is the only free lunch in investing. This platform can help you diversify your portfolio concentration using Hedging or shorting or it can reduce your exposure using leverage in lieu of full spot exposure.
Bridge Risk: The current state of pulsechain is that it is very dependent on the pulsechain bridge. There are currently no major CEX’s listing PLS. We only have very small native stable coin liquidity from CST. Therefore we depended on wrapped stable coins. If the bridge were to have issues it would be catastrophic for pulsechain and the protocol.
The protocol will be greatly dependent on wrapped in stable coins from ethereum until suitable native versions are available on Pulsechain. This is not something we can currently mitigate.
Smart contract risks: Please read our audit reports provided in the doc.
Jeet Dev Risk: It is possible that Devs get things wrong.
Execution Risk: Keep in mind that orders are not guaranteed to execute and may not be fulfilled in certain situations, including but not limited to:
The mark price, which is a consolidation of exchange prices, did not reach the specified price.
The specified price was reached; however, it did not persist long enough for the order to be executed.
No one was available to pick up the order and execute it.
Additionally, trigger orders are market orders and are not guaranteed to execute at the trigger price.
Hacking or Exploit Risks: It is possible for teammates, users or even RH coin whales to be hacked (including the OA and Godwhale) and this could lead to severe consequences.
PHLP Trading risks: The PHAME liquidity pool ($PHLP providers) is the counterparty to traders. On average traders lose however it is possible for traders to make profits for various periods and that comes at the expense of the PHLP liquidity pool.
Token risks:
Bridged tokens may depend on the security of the bridge
Depegging Risk pegged tokens have risks of depegging
OA Risk - The OA can rug pull any RH coin at any point in time. We assume this won’t happen, but it absolutely can happen. We are not responsible for this.
Godwhale Risk-Godwhale can rug any RH coin at any point in time. We assume this won’t happen, but it absolutely can happen. We are not responsible for this.
Admin keys on stable coins
Regulatory Risk: While we have always banned Americans from using or participating in PH products from Day 1 (and therefore we do not come under the SEC’s jurisdiction), the RH coins have been subject to an investigation and this has had dramatic impacts on price. This can work in both directions. Americans or any non OFAC compliant countries are banned from using any PH product. We always follow the law in our local jurisdiction and we encourage all users to ALWAYS follow their local laws. We have made an effort to ban various banned addresses.
PHLP Impermanent loss risks: Similar to providing LP on PulseX for a pair like PLS/DAI, providing LP on PHAME via $PHLP is essentially providing LP for {basket of risky tokens}/{basket of stablecoins}. In additional to traders' PnL, the value of $PHLP could also deviate largely from LP providers' initial deposit value if the underlying risky tokens move up or down by much.
PHLP Market risks: Team actually believe disabling swap function (as opposed to GMX original design) has largely decreased one major risk that the protocol can be used by malicious attackers by abusing the effective low slippage swap within the protocol. We have also implemented a 15-minute-window that one address has to wait from minting/buying new PHLP tokens to redeeming/selling PHLP. However, just as the interoperability design of $PHLP creates potential benefits, it may bring some additional risk as there is nothing that stops someone to buy PHLP on the open market (should someone provide decent liquidity of it) and sell to PHAME protocol to explore temporary price inefficiency. Such behaviors might create market volatilities.
Mitigations
Front running attacks: Front running attacks are addressed through a combination of measures, including the implementation of a two-step transaction process and the disabling of swap thereby minimizing the risk and impact of such attacks.
Scam wicks: PHAME oracle design effectively filters out rapid and illiquid "scam wicks", safeguarding against potential manipulative movements .
Flash loans: the opening and closing of positions, swaps, minting, and redeeming of PHLP are executed based on the oracle price. These prices are independent of the pool composition or parameters like long/short ratios, ensuring that flash loans do not affect these functions. The dynamic fees for swaps, on the other hand, depend on the pool composition, but they do not result in positive slippage.
Arbitraging: If pools are imbalanced for PHLP mint/redemption or perps, arbitraging can be done to gain a profit while helping to balance the pools.
Oracles
Our price oracles derive their data from PulseX pairs (purely on-chain), utilizing a Time-Weighted Average Price (TWAP) mechanism achieved by a sliding window Simple Moving Average (SMA) design. We acknowledge that this design may not encapsulate market volatility comprehensively. However, we have opted for this architecture to ensure our oracles retain a decentralized ethos while maintaining a satisfactory level of resistance against flash loan attacks and broader price manipulation. For more details please refer to PHAME Certik Audit Report, section [ PPO-01 CENTRALIZED PRICE ORACLE AND POTENTIAL PRICEMANIPULATION ], where more design logics, risk controls, decentralization details and other thinkings are discussed between PHAME team and Certik engineering team.
Please note we calculate WETH and WBTC prices using off-chain (off PulseChain) data instead of relying on on-chain (pulseX) information from PulseChain, in order to circumvent market manipulation risks posed by thin liquidity.
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