# Risks

Using cSigma Edge comes with various risks, including but not limited to smart contract risks, default risks, and potential loss of assets.

**Smart Contract Risk**\
As the value locked within smart contracts increases, so does the risk. The cSigma team takes this seriously and has conducted both internal and external audits to minimize vulnerabilities. The current version of cSigma’s smart contracts has undergone thorough reviews. You can find more details in the [**Security**](/csigma-protocol/technical-resources/security.md) section of the cSigma documentation.

**Default Risk**\
cSigma Edge connects lenders to institutional loans, which are secured by collateral and governed by lending agreements. However, there is always a risk of default by borrowers, which could lead to potential losses for lenders.

**Risk of Loss**\
Engaging in activities like holding, lending, or borrowing digital assets always carries the risk of loss, including the possibility of losing the full amount of your assets.

**Portfolio Risk**

The value of **csLYD** fluctuates and can go down. Because csLYD is backed by actively deployed on-chain strategies, not a fixed or redeemable asset, its price depends entirely on the performance of those strategies.

Key reasons the csLYD price may decrease include:

* **Strategy execution costs:** swap fees, bridging fees, third-party protocol fees, and gas costs during strategy deployment or rebalancing.
* **Strategy underperformance:** market volatility, liquidity changes, protocol risks, lower yields, or unfavourable funding conditions.
* **Temporary or realized drawdowns:** from delta-neutral, liquidity, or structured strategies during adverse market conditions.


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