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Depositing on Zyfai keeps three kinds of risk. The Agent reduces how long you sit in a bad pool. It does not remove the risk of the pool, and it does not insure you if that pool fails.

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1. The protocol under the position

Your capital is deposited into the underlying protocol: a lending market, a curator vault, or an async vault, depending on strategy. Smart contract bugs, oracle failures, bad debt, and liquidity traps in that protocol are the same risks you would take by depositing there yourself. Zyfai does not run those pools and does not mix your funds with other users’ funds. A loss in one Safe does not socialize across other Safes. Curated vaults, including Morpho vaults, add the curator’s allocation choices on top of the lending markets underneath. The Risk Framework maps that hierarchy before a pool is whitelisted, and reviews it as curators change allocations. On a lending pool, a drop in share price or any bad debt triggers an immediate exit. Positions are also reduced or exited when too many borrowers sit near liquidation, when the oracle runs ahead of the market, or when the pool’s collateral mix drifts below your strategy tier. Those thresholds are in What we monitor.

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2. The asset

A stablecoin, a liquid staking token, or a wrapper can lose its peg or its backing. That loss happens in the asset, whether or not you use Zyfai. Collateral rules depend on the strategy. On Conservative, a stablecoin collateral needs more than 100% backing and no depeg of 0.5% or more in the past six months. Aggressive and Yield Maxxing allow a wider depeg history. The full table is in the Risk Framework. If a live collateral moves 50 bps off its peg, monitoring raises a warning. At 100 bps the Agent treats it as risky and rebalances away. Details are in What we monitor.

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3. The Zyfai layer

The Agent and the Session Key are an extra system between you and the pool. That system can fail, or be paused. What limits that risk:
  • The Agent can only call contracts in your signed registry. It cannot send funds to an arbitrary address.
  • You remain the Safe owner and can exit through Safe without the Agent.
  • A 3/5 multisig can pause Session Key execution. Funds stay where they are.
  • The executor, registry, and related contracts are covered by the Sherlock audits.

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What is not covered

There is no insurance fund and no reimbursement if an underlying protocol loses money. The response designed into the product is detection and exit, described in Emergency Response, not a payout after the fact. Past exits (Stream Finance, Resolv, Aave / Kelp) are summarized in What we monitor. Next: What we monitor.