*️10.1 Market Risks

1. Cryptocurrency Volatility:

• The value of arrUSD is backed by SOL (Solana) with a 125% collateralization ratio. However, the price of SOL can exhibit extreme volatility, especially in a rapidly changing crypto market. While arrUSD is designed to stabilize, significant fluctuations in SOL’s price may impact the platform’s stability.

• Though arrUSD aims to mitigate volatility, extreme market conditions or large-scale liquidations of collateral assets may cause arrUSD to deviate from its target value, potentially impacting premium calculations and claims disbursements.

2. DeFi Protocol Risks:

• DeFi protocols are often experimental in nature and come with inherent risks due to their evolving infrastructure. Bugs in smart contracts, vulnerabilities in protocol governance, or failures in decentralized mechanisms can expose participants to substantial financial losses.

• Participation in decentralized finance (DeFi) protocols through InsuranceDAO.World can expose users to risks such as impermanent loss, smart contract vulnerabilities, or failures in price or data oracles.

3. Liquidity Risk:

• Liquidity risk arises when users are unable to exit their positions due to insufficient liquidity in the insurance pools or Verified Nodes. Low liquidity can prevent participants from making timely premium payments or receiving claim payouts.

• During periods of high demand or market stress, liquidity shortages could delay claims processing and affect the fairness of pricing or payouts.