When investing in anything, there are risks small and large.
Before investing into yXLM, yBTC, yETH, and yUSDC yield generating tokens issued by Ultra Capital, we recommend you to take your time to research and fully understand the risks involved. There are a few sources of risk with varying levels of severity: underlying risk, the “lego” risk of our integrated services, customer side risk, and risk within the Ultra Capital product.
yXLM, yBTC, yETH, and yUSDC yield generating tokens are issued on and powered by the Stellar blockchain (the Stellar network). As those tokens are issued on the said blockchain, they have an innate risk tied to the Stellar Network. If the Stellar blockchain ceases to exist or stops functioning completely, yXLM, yBTC, yETH, and yUSDC tokens will cease to exist or stop functioning completely as well. However, this is extremely unlikely as such a bug could devastate the entire Stellar ecosystem.
The same risks apply to the blockchains of anchored assets such as Bitcoin and Ethereum blockchains.
Since Ultra Capital integrates with several services to access higher APY rates available on the market, we carry the “lego” risk of these services. For example, an integrated service could lose our funds from a bug or hack; however, along with the failure of the Stellar blockchain, this is one of the more severe and unlikely risks.
There are varying levels of severity with this as well. For example, an integrated lending service may fail to generate interest despite appearing as the ideal service, but wouldn’t result in the loss of consumer funds. Another mild case is when a partner service change on our end results in a smaller yield percentage, and smaller interest rewards.
In terms of consumer side risk, there is always the possibility of a bug or hack of a user’s browser, mobile app, or OS which could cause a loss of funds, or, more mildly, it may temporarily break deposits or withdrawals.
As yXLM, yBTC, yETH, and yUSDC tokens are deposited and stored directly on personal Stellar wallets of each user, there is always the possibility of a hack, scam, wallet seed or private key loss, or unfavorable exchange on Stellar Decentralized Exchange (SDEX) which could cause a loss of funds.
Misplacing the wallet address at the deposit or withdrawal form may result in a transfer delay, extra transaction fees, or a full loss of funds.
The sources of risk within the Ultra Capital product (tokens and services) involve the frontend and the backend-related services.
In the frontend, breaches and bugs can occur either in code, domain, or hosting, with the most extreme cases involving a loss of customer funds, but lesser incidents resulting in withdrawals temporarily breaking or being temporarily unavailable, without a loss of funds.
However, the more moderate situation would be if a bug caused funds to be allocated incorrectly or the deposit/withdrawal to be delayed.