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There is a hefty amount of heavy-loaded terms on our website, such as: “staking”, “depositing”, “rate”, “profit”, “lending”, “borrow”, “farming”, “yield”, “invest”, “income”, “claim”, “liquidity”, “withdrawal” “profit”, “assets”, “liquidity”, “emission”.
We would like to outline, that when used these terms are not to be taken literally. We use these terms for metaphors or analogies, as by using these terms loosely and interpreting them we can reach an understanding of the decentralized-finance smart contract system, its largely deterministic operations, as well as the nature of traditional finance transactions between people.
This platform allows people to share their tokens directly with other people through smart contract systems and given all reasonable assumptions related to behavioural effects of incentives, probably get their tokens back eventually, plus extra tokens in most cases.
When talking about lending, the ‘lender’s’ financial return does not depend on the same pillars as in traditional lending. The creditworthiness, solvency, or financial skill of the ‘borrower’ are disregarded. Also, the software allows to be rid of bureaucratic formalities such as the perfection of lines, or the creditor’s priority in claims in a bankruptcy.
Instead, it stands on an incentive model, the heart of by the system’s design and insuring the reliable deployment of such software. Unlike in traditional debt relationships, the ‘borrower’, who takes tokens from a smart contract system doesn’t have the requirement to pay the tokens back. If a ‘borrower’ never pays these tokens back, no promise has been broken, there was no official legal breach, and the ‘lender’ cannot sue the ‘borrower’ to get their tokens back.
However, by not repaying the borrowed tokens, the token ‘borrower’ is viewed by demonstrating behaviour of lacking sufficient incentive to want to return the tokens to the system. For instance, a situation may be imagined when the ‘collateral’ bound to the smart-contract was worth much less than the ‘borrowed’ tokens.
Additionally, an account for potential technical issue needs to be made, such as congestion of Ethereum network. This congestion may have prevented a borrower to give the tokens back. Regardless, it is important to remember that there is no obligation for these ‘borrower’ to repay tokens when they do not want to or cannot do so, and this cannot be mitigated legally when insufficient incentives or technical problems result in a token shortfall for the ‘lender’.
“Lending” or “depositing” tokens into a third-party smart-contract system is a type of agreement that is most dissimilar traditional debt instruments. There could be the case when a ‘borrowing’ smart contract has not presented a ‘collateral’ and could malfunction or suffer a loss that leads to an incomplete to return the “borrowed” tokens. When this may occur, the “lender” doesn’t have a contractual mitigation for their tokens against the smart contract “borrower” or its creators.
It should be noted that the third-party smart contract is not a person, is usually not under the full control of any person or persons, with when initiated may be impossible to pause or reverse. In the event of malfunctioning, exploitation or underperformance, smart contract cannot be forced (in court or otherwise) to pay the “borrowed” tokens back.
The denomination of the token in terms of its ARP or APY for a certain vault or Strategy is done in term of a relevant token, not in terms of U.S. Dollars or other fiat currencies.
Each Strategy is a future forecast based on a good faith belief of how to prudently forecast results over a relevant period, however this belief relies on various assumptions and is subverted to risks and uncertainties (including smart contract security risks and third-party actions) which could result in a materially different (lower or higher) token-denominated APR or APY.
Strategies are not offers, promises, agreements, guarantees or not to be undertakings on the behalf of any person or group, but mainly rely on the results of operation of smart contracts and other autonomous or semi-autonomous systems (including third-party systems) and the way third parties interact with those systems following your deposit.
Even if a particular projected Strategy is achieved, you may still incur a financial loss in fiat-denominated terms. This may be if the fiat-denominated value of the subject tokens (your deposit and any tokens allocated or distributed to you pursuant to the Strategy) falls during the deposit period. APRs and APYs are not interest rates being paid on a debt.
To sum up, while seeming superficially familiar and drawing on similar concepts, smart-contract systems are different from traditional instruments. DeFi and TradFi each have distinctive benefits, risks and protection mechanisms, with subsequent relevant cost.
We advise you to bear the elaborated above in mind, when using this website and its software. We urge people not to use Bolide Strategies without sufficient understanding of the unique risks involved, or how these Strategies differ from traditional financial transactions.
The only way to fully understand such risks is to have a strong understanding of the relevant technical systems and the incentive design mechanisms they embody. We have a very supportive and welcoming community, so if you need to ask questions or require guidance, do not hesitate to find us on any of our social media platforms.