> For the complete documentation index, see [llms.txt](https://nx-finance.gitbook.io/nx-finance-whitepaper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://nx-finance.gitbook.io/nx-finance-whitepaper/protocol-mechanism/risks.md).

# Risks

## **General Risks** <a href="#general-risks" id="general-risks"></a>

#### **Legal Considerations**

Users must understand the legal implications of their activities within NX Finance.

#### **Tax Obligations**

All tax-related outcomes from your transactions are your responsibility.

#### **Market Fluctuations**

The volatile nature of market prices means they can shift rapidly without warning, and historical trends may not predict future movements.

#### **Unforeseen Risks**

It's probable that there are additional risks not identified in this document.

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## **Solana Network Risks** <a href="#solana-network-risks" id="solana-network-risks"></a>

#### **Wallet Security**

Loss of your wallet access results in an irreversible loss of funds stored in NX Finance.

#### **Solana System Risks**

Past instances of network halts have temporarily disabled on-chain functionalities. These could recur, potentially with extended or permanent impacts, leading to a complete loss of funds.

#### **Service Fluctuations**

The quality and timeliness of Solana's services may degrade, as evidenced by past occurrences.

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## **Oracle Risks** <a href="#oracle-risks" id="oracle-risks"></a>

NX Finance utilizes Pyth oracles. Any disruptions, inaccuracies, or manipulations within oracle can lead to incorrect price feeds, affecting user transactions and potentially freezing accounts due to invalid oracle data.

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## **Token Risks** <a href="#token-risks" id="token-risks"></a>

The interaction with Solana tokens carries inherent risks, including potential depegging of bridged or stablecoin tokens, which might trigger unintended liquidations.

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## **NX Finance Specific Risks** <a href="#nx-finance-specific-risks" id="nx-finance-specific-risks"></a>

#### **Program Vulnerabilities**

The underlying Solana program of NX Finance may contain exploitable bugs leading to a range of issues from minor to catastrophic, including total fund loss.

#### **Security Council Decisions**

The Security Council, with delegated powers, can make rapid changes in response to security threats, potentially limiting platform functionality until a DAO vote can be conducted.

#### **Margin Liquidations**

Engaging in margin positions carries the risk of liquidation due to market shifts.

#### **Socialized Losses and Cascades**

Inefficient liquidations could result in negative equity, impacting even non-risky accounts, and large liquidations could trigger market movements leading to further liquidations.

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## **Service Dependencies** <a href="#service-dependencies" id="service-dependencies"></a>

NX Finance depends on various services for data scraping, event processing, and user interface hosting. Disruptions or compromises in these services could impact the platform's operation and user experience.

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## **Trading Risks** <a href="#trading-risks" id="trading-risks"></a>

#### **Withdrawal Limitations**

Withdrawal of tokens might be restricted if not enough tokens are available in the vaults due to lending activities.

#### **Interest Rate Variability**

Borrowing and depositing interest rates are subject to change based on token utilization, affecting returns.

#### **Perpetual Market Risks**

Limited liquidity could hinder position exits, and significant, rapidly changing funding rates could impact trades.