DimeFi leverages the DeFi platforms to earn you high returns, and your deposits are subject to a different risk profile than deposits to a bank account. At DimeFi, we aim to partner with our customers in the long run, so the security of your funds is our top priority. This article summarizes three main categories of risk when you earn high yields on DimeFi.

Decentralized Finance(DeFi) Technology and Platform Risk

DeFi platforms (like banks) can fail when the underlying technology (i.e. Ethereum blockchain) fails, the smart contract run by the platform fails, or the project’s developers perform malicious activities.

Our Mitigations

At DimeFi, we worked only with the most widely-adopted blockchains and battle-proven DeFi platforms to deploy our assets for yields. Currently, we have our assets on Curve and Convex Finance Protocol, two of the largest and most vetted platforms in the industry. In aggregate, they have over $15 billion assets under management (as of 5/12/2022) and are regularly audited by well-known security experts for potential security loopholes and smart-contract bugs.

On top of our high standard for partner selection, our ability to identify potential failure early on is another effective way we mitigate risk and work to reduce loss. The DimeFi team, the same engineering team that built Uber's in-house risk-detection system for its billion-dollar cash-flow business, has built an advanced monitoring and alerting infrastructure, which allows us to detect risk signals on DeFi as early as possible.

Last but not least, we also reduce risk by diversifying our assets in multiple lending partners. We split our assets among reputable institutional borrowers and most-vetted DeFi platforms.

Stablecoin Lending Risk

USD deposits are converted to USDC first and can be further converted to other types of USD-pegged stablecoin so that we can deploy them to DeFi platforms to earn. As we lend our assets to DeFi platforms, there is a risk that stablecoin loses value in events like stablecoin depeg or the borrower default and can't repay the loan.

Our Mitigations

We work with stablecoins that are backed by real assets with a preference for those that are over-collateralized. In addition, we leverage our DeFi real-time risk control technology to detect early signs of stablecoin depeg risks so that we can convert them back to USDC or USD before significant loss of value happens.

DimeFi Operational Risk

Operational risk refers to the risk of losses caused by DimeFi's operational flaws and employee errors.

Our Mitigations

We have implemented a few critical internal control processes to keep operational risk at a minimum.

Enterprise-grade storage for our crypto assets.

To ensure our crypto storage is secure, we’ve partnered with Fireblocks to store our assets in enterprise-grade secure storage. We leverage Fireblocks’ MPC-CMP algorithm to refresh the multi-party key shares in minutes-long intervals .automatically. This means a malicious actor only has a few moments to steal all the key shards before the shares are refreshed, and they have to start over.

Multi-level approval for every large transaction.

Fireblocks also brings us a Transaction Policy Engine, which allows us to set up multiple-level approval processes for large transactions. This means that even if a hacker has compromised our system, transferring our assets out of the storage will still require executive approval.

Internal access control to DimeFi's internal tools and tech infrastructure

We have followed industry best practices on internal access control to ensure a secure connection to our tech infrastructures from DimeFi employees. All employees must use 2FA to protect each access touchpoint with regularly rotated passwords and access keys. All internal tools can only be visited over a VPN connection to protect against hacks and malicious access attempts.

Your data is protected

We keep data collection at the minimum and all personal data is encrypted by SSL while in transit.

Control Your Risk

Because DimeFi is not a bank, funds at DimeFi are not FDIC-insured. Even though we aim to do everything to protect our assets, crypto lending is not at zero risk. As the saying goes, "Don't put all your eggs in one basket.” In other words: Never allocate funds that you can't lose in any one investment vehicle.

Did this answer your question?