Risks of Bao / Reasons Not to Use Bao

Many teams focus on why you should use the products they make. But in crypto DeFi, there are lots of risks and we think it is responsible for a team to tell you those risks and reasons not to use the product.

We also outline steps we took for protecting against these.

Risks:

  • "Pending Bao" is a pending balance. It is not minted or locked until you hit harvest. If there are changes to the contract, that impact the calculation of Bao, or a pool going through the chopping block, if you do not harvest the pending Bao is not minted and can no longer be claimed. The devs have no way to override these changes.

  • Bao is a complicated product. If you do not keep up with the ecosystem or read the documentation, you may lose your "Pending Bao" during changes. These changes will not impact locked Bao or LP tokens.

  • The new deposit/withdraw fee systems could have math errors resulting in failing.

    • We've tested these functions, apply safe math, and functions seem safe but it is always a risk.

  • Block deltas could have bug or risk of not making correct calculations which would impact user fees.

  • Once fees are taken it is challenging to remap fees back to the main user.

    • In all tests of block delta and fees, the correct fee amounts were taken.

    • We also have commands to manually adjust block delta counts so that customer support can help users facing issues.

  • Unknown edgecase logic gaps could cause contract errors.

  • The economic system could result in heavy distribution that overly dilutes the per token value of early buyers.

    • It is recommended to always farm for Bao and not to be purchasing as an investment (this is not an investment product)

  • Since the migration has a timelock, if there is a critical error or hack, users must withdraw tokens themselves. If this happens they may face higher fees from the sliding fee scale system.

  • Front end errors could break the ability to interact with the contract.

    • We have documented "How to manually use the contract"

  • The Bao team may be unable to deliver on future stages of the project if they do not retain their technical talent, face financing concerns, or governance challenges such as being voted out early.

  • The Bao team may be unable to deliver on futures stages of the project if changing legal or regulation demands it.

  • Frontend errors, or balance errors, may make it challenging to fairly track or distribute rewards for referral users.

  • Large investors may dominate the early pool creating unfair advances in governance or market price.

    • We have attempted to mitigate this by adding in very diverse pools and rewards and long term locks that are bad for big liquidity providers who only use a project short term.

  • The economic decisions made by the team to provide liquidity, pay vendors or pay the team, could result in negative ecosystem price during early days.

    • We expect this to balance out long term, which is why user funds are locked and vested on three years.

  • Rewarded liquidity partners and exchange listing partners may cause lower ecosystem price in the early days.

    • We expect this to balance out long term, which is why user funds are locked and vested on three years.

  • Bao does not have a full-time engineering lead yet. It is a one-person project from a self-taught developer. This increases the early risk of bugs and glitches that the project may not be able to respond as quickly to.

    • We expect to address this by hiring more developers.

Why you should not buy Bao

It is important to understand that BAO is not an offer for investment. It is a community project. When you provide yield to BaoMasterFarmer contract or to future synthetic and margin contracts, you are rewarded with the Bao governance token which lets users partake in the governance process and in the future, if the community decides, has claim to treasury assets and fees from the ecosystem.

However, you should not buy Bao if you are not an active participant in the ecosystem and you should not use bao at all depending on your risk tolerance.

Please do not buy or use Bao if:

  • You do not understand all the associated fees on deposits, withdrawals and other transactions.

  • You are buying Bao as a speculation asset.

  • You think Bao can only go up.

  • You do not know the emission plan or lockup.

  • If you are using money you cannot afford to lose.

  • You are concerned about short term price.

  • You are using too much of your portfolio in Bao.

  • You are unfamiliar with Impermanent Losses.

  • You are not interested in the long term of the project.

  • You are unable to directly interact with a contract via Etherscan.

  • If you do not actively keep up with projects when you hold their token.

  • You do not want to vote on governance.

  • You have a low risk tolerance.

Bao may represent gains for farmers and participants within the ecosystem, but it is important to remember that there is significant risk and dilution for yield farming projects short-term that may hurt buyers.

Like all DeFi startups Bao has a risk that it may not be successful or may drop in price.

If you do not understand this, then please do not use Bao.

Bao Team will be focused on making decisions that are best for the long term healthiness of the Bao products, governance and community, this means that in the short term, these decisions may not always be best for the price of tokens.

Your use of Bao products should be focused on earning more Bao tokens and the long term success of the bao system.