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Risks and Safety

Glow Finance leverages advanced DeFi mechanics to provide leveraged staking, borrowing, and restaking opportunities. While these features offer potential for amplified yields, they also carry inherent risks. This article outlines the key risk categories associated with Glow Finance and provides actionable mitigation strategies for each.

Audits​

All core smart contracts in Glow Finance are periodically audited by leading security firms. However, even audited contracts carry residual risk.

Mitigation: Always make sure you’re using the official app URL: https://app.glowfinance.xyz/, Interacting with lookalike or unofficial sites can put your funds at risk. Bookmark the official app link and double-check it before connecting your wallet.

Smart Contract Risk​

Glow Finance operates through smart contracts that manage critical functions like leverage swaps, liquidation mechanics, and margin account management. Despite comprehensive audits, potential vulnerabilities may exist.

  • Mitigation:
    • Interact only with verified contract addresses
    • Regularly check for announcements regarding contract upgrades or security patches.
    • Maintain collateral ratios well above liquidation thresholds to minimize potential losses from unexpected contract behavior.

Liquidity Risk​

If liquidity in the pool drops significantly, users may face borrowing or withdrawal restrictions.

  • Scenarios:

    • Utilization rates exceed 95%, capping borrowing capacity to maintain pool integrity.
    • Withdrawals may be delayed if liquidity is temporarily depleted due to high demand.

    Why This Is Temporary:

    When utilization spikes, Glow’s dynamic interest rate model raises the borrow APR. This incentivizes new lenders to supply liquidity, helping to restore balance naturally. As a result, high-utilization periods tend to self-correct over time.

  • Mitigation:

    • Monitor pool utilization metrics before initiating large transactions.
    • Plan deposits and withdrawals strategically to avoid periods of high utilization.
    • Stay informed of protocol updates that may impact liquidity management.
tip

Learn more in our Margin Pools Overview and how Glow minimizes this risk using Optimized Lending Pool Mechanics.

Vault Risks​

Glow Vaults pool user assets and deploy them across integrated DeFi protocols to optimize yield. While vaults are engineered for security, diversification, and risk-managed performance, they introduce several inherent risks that users should understand before depositing.

Participation in Glow Vaults involves risk, including the potential loss of principal. Nothing in this article constitutes financial, investment, or legal advice. Please review the Terms of Use and consider your individual risk tolerance before engaging with any vault.

Smart Contract and Protocol Risk​

Vaults rely on smart contracts and external protocol integrations. Vulnerabilities, exploits, or failures in any integrated protocol could result in loss of funds or temporary performance disruption.

Mitigation

  • All integrated protocols undergo third-party audits and internal security reviews before deployment.
  • The Glow team continuously monitors for protocol-level risk signals and may pause deposits or rebalance allocations when necessary.
  • Protocol exposures and strategy allocations are transparently displayed within the Glow app and vault documentation.

Liquidity and Redemption Risk​

Vault liquidity depends on the availability of funds within integrated strategies. During periods of high utilization, market stress, or heavy withdrawal activity, withdrawals may be delayed or placed into a Withdrawal Queue.

Mitigation

  • Queued withdrawals are automatically processed within 72 hours.
  • The Glow interface displays real-time queue status and ****countdown timers
  • Selected vaults may maintain liquidity buffers to improve redemption efficiency during volatile conditions.

Market and Performance Risk​

Vault yields are variable and depend on market conditions, interest rate changes, and underlying protocol incentives. Historical APYs do not guarantee future results.

Mitigation

  • Displayed APYs are dynamically calculated based on recent share-price performance and updated whenever the vault operator reports a valuation update.
  • The Glow team actively rebalances allocations to maintain stable, risk-adjusted returns.
  • The app shows the “Last updated” timestamp under each vault’s APY/Rewards field for full transparency.

Collateral and Liquidation Risk​

Some vault strategies use collateralized borrowing. Sudden price swings or oracle errors can impact collateral ratios, which could trigger partial liquidations within the strategy.

Mitigation

  • Glow enforces conservative loan-to-value (LTV) limits.
  • Vault operators continuously monitor collateral health and can rebalance or unwind positions proactively.
  • Liquidation management is automated at the vault level — individual users are never margin-called or required to take action.

Operator and Administrative Risk​

Each vault is managed by an authorized Vault Operator, responsible for allocation, reporting, and vault maintenance. Misconfigurations or delays in operator updates may temporarily affect displayed metrics or share valuations.

Mitigation

  • All operator actions and updates are recorded on-chain and subject to audit.
  • Operator addresses and update logs are publicly available for community verification.

Liquidation Risk​

Liquidation occurs when the Health Level of a margin account drops below zero, indicating that effective collateral is insufficient to cover borrowed assets.

  • Mechanics:
    • Liquidations are partial by design, aiming to restore account health without fully closing the position.
    • Collateral is first used to repay debt, with remaining assets either returned or further liquidated depending on account health.
  • Mitigation:
    • Maintain conservative leverage levels, especially during high volatility.
    • Regularly monitor key metrics in the Account Overview panel, including Effective Collateral, Required Collateral, and Health Level.
    • Repay debt in response to market fluctuations to avoid cascading liquidations.

Leveraged glowSOL Vault​

If you're using the Leveraged glowSOL Vault, it's important to understand:

SOL price drops do not affect your Health Level or trigger liquidations. This strategy is designed with no SOL market price exposure. Your position health is only impacted by:

  • A glowSOL or sSOL depeg (i.e. if glowSOL trades significantly below SOL).
  • Prolonged periods where borrow APR exceeds leveraged yield, causing slow Health Level decline. For example: At 2× leverage, if glowSOL earns 6% and your SOL borrow rate is 3%, you break even. But if the borrow rate goes up to 4%, you start losing yield — and over time, your Health Level will go down.

Strategy-Specific Risks​

The Leveraged glowSOL Vault helps users boost their staking rewards by borrowing SOL and restaking it into glowSOL, Glow’s staking token. This strategy carries its own set of risks:

  • Risks:

    • Price Depeg Risk: While SOL price movements do not affect Health Level in this vault, users can still be liquidated if the glowSOL/SOL or sSOL/SOL peg drops significantly. These pegs are normally stable, but extreme or sustained deviation could impact account safety.

    • Unstaking Delay: Withdrawing funds from a vault triggers a 7-day unstaking period, during which glowSOL is being converted back to SOL and cannot be accessed.

    ℹ️ Note: Support for instant withdrawals is planned in a future release, once the glowSOL/SOL AMM pool is live.

  • Mitigation:

    • Monitor the Unstaking Queue or set an alarm when in the withdrawal process, to anticipate when assets will become available.
    • Use the Liquidation Price metric to assess exposure.
    • Check the current SOL borrow rate to see if the vault is profitable. The strategy is unprofitable if your leveraged restaking APR (glowSOL base APR × selected leverage) is less than the SOL borrow APR.

Unstaking Queue Delays​

Initiating a glowSOL withdrawal starts a 7-day unstaking queue, during which the unstaked assets remain illiquid.

  • Risks:
    • During the queue period, users cannot access unstaked SOL to repay debt or adjust collateral.
    • SOL price changes during the 7-day unstaking queue do not impact your position’s Health Level. However, if glowSOL or its underlying asset sSOL depegs from SOL during that time, your position’s health could decline and lead to liquidation.
  • Mitigation:
    • When you initiate unstaking, your glowSOL enters a 7-day illiquid period. During this time, it cannot be withdrawn or used in other strategies. You will still be able to manage your position (including borrow and repay actions) while unstaking is in progress — but the unstaking glowSOL itself remains locked until the 7-day queue completes. ****
    • Monitor the unstaking queue directly within the “Manage Vault” section of the Leveraged glowSOL Vault. It shows exactly when each unstaking request will complete and when your SOL will become available for withdrawal.
    • Consider initiating unstaking when SOL borrow APR is relatively low or stable, as this reduces the chance of your Health Level declining if interest costs temporarily exceed your leveraged restaking yield during the 7-day queue period. This risk is uncommon — SOL borrow rates tend to revert quickly, and prolonged high-rate periods have historically been rare.
    • You may cancel a pending unstaking request during the 7-day queue if needed. However, this comes with a small cancellation fee. The performance fee (charged in glowSOL) is taken at the moment you initiate withdrawal. If you cancel the withdrawal during the queue, that fee will not be refunded. This applies even if the glowSOL is never converted back to SOL.

Interest Rate Spikes​

Borrowing costs in Glow Finance adjust dynamically based on pool utilization, with key utilization thresholds affecting borrowing rates:

  • Regimes:
    • Less than 85% Utilization: Base Borrow Rate at 0.50%
    • 85%-95% Utilization: Rate increases to 6.00%
    • 95% Utilization: Max Borrow Rate spikes to 160% to discourage further borrowing.
  • Mitigation:
    • Monitor utilization rates in the Borrow Panel before initiating leverage.
    • Reduce borrowing during periods of high utilization to avoid sudden rate spikes.
    • Adjust leverage proactively to maintain lower borrowing costs.
tip

Learn more about pool mechanics.

Position Management Constraints​

Margin accounts in Glow Finance are limited to 24 user-managed positions, with an additional 8 positions reserved for internal operations such as liquidations.

  • Risks:
    • Exceeding the 24-position limit prevents new deposits or borrows.
    • Users must close or consolidate positions to free up space.
  • Mitigation:
    • Use the Manage Positions popup to identify and close inactive or redundant positions.
    • Regularly review position usage to avoid inadvertently reaching the limit.
    • Consolidate smaller positions to minimize position count.

Third-Party Integration Risks​

The Leveraged glowSOL Vault uses glowSOL, a wrapped version of sSOL — issued by Solayer, a leading staking protocol that Glow integrates with. This means the value and behavior of your position is indirectly tied to the stability of sSOL.

  • Any technical, governance, or security issues affecting the sSOL protocol may indirectly impact your position in the vault.
  • While glowSOL itself does not currently carry collateral weight, leveraged users still depend on the glowSOL/SOL peg to maintain a healthy margin account.
  • If sSOL depegs significantly from SOL, it could cause a drop in Health Level and potentially lead to liquidation for users of the Leveraged glowSOL vault, since the vault relies on the glowSOL/SOL peg to maintain account stability.

Mitigation:

  • Monitor the sSOL/SOL peg (and by extension the glowSOL/SOL peg) for signs of instability.
  • Stay informed via Glow Finance and Solayer announcements and status updates on supported assets.