Risk Disclosure

Varla is experimental DeFi software. Using Varla involves real financial risk. This page describes known risks — it is not exhaustive.

Do not deposit more than you can afford to lose. DeFi protocols carry inherent risks that cannot be fully eliminated.

Smart Contract Risk

All DeFi protocols carry smart contract risk. Even with audits and testing, bugs can exist.

What This Means	Mitigation
Code bugs could lead to loss of funds	Contracts are audited and open source
Immutable contracts cannot be patched	Extensive testing and formal verification
Audits reduce but do not eliminate risk	Do not deposit more than you can afford to lose

Varla uses a push-based oracle. An off-chain service pushes prices to on-chain contracts.

What This Means	Mitigation
Incorrect prices could trigger unfair liquidations	Conservative pricing: min(spot, TWAP)
Oracle downtime may block some actions	On-chain staleness checks reject stale prices
Manipulation risk exists with any oracle	Liquidation grace windows protect against sudden recovery

If your health factor drops below 1.0, your collateral can be liquidated.

What This Means	Mitigation
Market moves can trigger liquidation	Monitor your health factor
Gas spikes can delay your repayment	Keep buffer — don't borrow to the maximum
You may lose collateral + pay a liquidation bonus	Set up alerts for health factor changes

If the pool is highly utilized, lenders may not be able to withdraw immediately.

What This Means	Mitigation
Withdrawals are limited by available liquidity	Monitor pool utilization before depositing
`maxWithdraw` / `maxRedeem` reflect real-time limits	Do not assume instant withdrawals
You may need to wait for borrowers to repay	Diversify across pools if concerned

Varla operates on top of prediction market platforms (Polymarket, Opinion, Kalshi).

What This Means	Mitigation
Underlying platform issues affect Varla	Understand how the underlying platform works
Market resolutions are controlled by the platform, not Varla	Varla has no control over outcomes
Token standards (ERC1155, CTF, NegRisk) are dependencies	Review platform documentation

DeFi and prediction markets exist in an uncertain regulatory environment.

What This Means	Mitigation
Regulations may change	Understand your local regulations
Access may be restricted in some jurisdictions	Consult a tax professional
Tax implications vary by jurisdiction	Varla does not provide legal or tax advice

Risk	Description	Your Action
Smart contract	Code bugs	Don't deposit more than you can afford to lose
Oracle/pricing	Incorrect or delayed prices	Monitor health factor; keep buffer
Liquidation	HF < 1.0 triggers liquidation	Don't borrow to the max
Liquidity	Withdrawals limited by utilization	Check `maxWithdraw` before depositing
Platform	Underlying platform issues	Understand Polymarket/Opinion
Regulatory	Laws may change	Know your local rules

If you have questions about risk, reach out: