# Risks & Considerations Participating in Levrex Finance involves various risks. Users should be aware of these before supplying capital or taking leveraged positions. #### 1. Smart Contract Risk Levrex is powered by smart contracts, which may contain bugs or vulnerabilities. While audits and security reviews help minimize these risks, no system is completely immune to failure or exploitation. #### 2. Liquidation Risk Borrowers using leverage must monitor their **Health Factor** closely. A sharp drop in collateral value or an increase in borrowed token demand can lead to liquidation, where part or all of your collateral may be sold. #### 3. Market Risk DeFi yields and token prices are subject to volatility. Market downturns can reduce returns or lead to impermanent loss, particularly for strategies involving liquidity pools or farming positions. #### 4. Protocol Dependency Levrex interacts with external protocols like Sushiswap, YearnFi, and Morpho Labs. Changes in their functionality, incentives, or reliability could impact Levrex’s performance. #### 5. Regulatory Risk As DeFi continues to evolve, regulatory frameworks may shift. Users should be aware of any legal obligations applicable in their jurisdiction. #### 6. Peg Stability AUSD must maintain its peg for the platform to function effectively. Depegging could introduce instability in lending and borrowing operations. #### Best Practices for Users * Start with small positions * Avoid using max leverage * Regularly monitor Health Factor and protocol updates * Stay informed through official Levrex communication channels DeFi offers powerful tools, but users should always conduct their own research and exercise risk management. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.levrex.finance/guide/risks-and-considerations.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.