Risks and Best Practices¶
This module summarizes risks when using Indigo and best practices to stay safer. It also includes important disclaimers.
Learning outcomes¶
- List main risks (liquidation, slippage, smart contract, etc.).
- Apply practical steps to reduce risk.
- Understand why “not financial advice” and “do your own research” matter.
Important disclaimer¶
Not financial or legal advice
This content is for educational purposes only. It does not constitute financial, investment, tax, or legal advice. Indigo and crypto assets involve significant risk. Always do your own research and consider consulting a qualified professional before making financial decisions. Never invest more than you can afford to lose.
Main risks¶
1. Liquidation risk¶
If your CDP’s collateralization ratio falls below the protocol minimum (e.g. because collateral price drops), your position can be liquidated. You may lose part or all of your collateral depending on protocol rules.
Mitigation: Mint conservatively, keep a buffer above the minimum ratio, monitor your liquidation price, and add collateral or repay debt when needed.
2. Volatility and slippage¶
Collateral (e.g. ADA) and iAssets can be volatile. When you swap iUSD on a DEX or when liquidations occur, slippage (difference between expected and executed price) can be significant, especially in large or illiquid markets.
Mitigation: Use limit orders or smaller sizes where possible; check expected output before confirming trades.
3. Smart contract and protocol risk¶
Indigo relies on smart contracts and oracles. Bugs, exploits, or incorrect oracle data could lead to loss of funds. Protocol parameters can also change via governance.
Mitigation: Use only official Indigo interfaces; verify contract addresses; understand that code and parameters can be upgraded.
4. Counterparty and custody¶
You are responsible for your wallet and keys. If you lose access or someone gains access, funds can be lost. Third-party custodians (if you use them) have their own risks.
Mitigation: Secure your seed phrase; use hardware wallets for large amounts; be wary of phishing sites and fake links.
5. Regulatory and tax¶
Regulation of stablecoins and synthetic assets is evolving. Tax treatment of minting, swapping, staking, and rewards varies by jurisdiction.
Mitigation: Comply with local laws; consider professional tax advice.
Best practices¶
| Do | Avoid |
|---|---|
| Use official Indigo links only; bookmark the app. | Clicking random links from social media or DMs. |
| Start with small amounts when learning. | Putting in more than you can afford to lose. |
| Monitor your CDP ratio and liquidation price. | Minting up to the maximum and forgetting. |
| Keep a safety buffer above the minimum ratio. | Ignoring market moves when you have an open CDP. |
| Secure your wallet and seed phrase. | Sharing keys or storing seeds in plain text online. |
| Read the docs and understand liquidation and Stability Pools. | Relying only on third-party summaries. |
Summary¶
- Risks include liquidation, volatility, slippage, smart contract/oracle risk, custody, and regulation.
- Best practices: use official links, small sizes, monitor your CDP, secure your wallet, and do your own research.
- Disclaimer: This is education, not financial or legal advice; you are responsible for your own decisions.
You have completed the Beginner track. To go deeper technically, see the Developer track. To recap, use the Beginner index.