April 15, 2022

Understanding Debut: What are the risks?

Understanding Debut: What are the risks?

We believe in an open and honest dialogue that makes our customers feel empowered. We want to take you behind the scenes to share the risks and how we bring you returns.

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Understanding Debut: What are the risks?

How Debut makes it safer to grow your money with DeFi

Two of our core values at Debut are transparency and financial inclusion. We believe in an open and honest dialogue that makes our customers feel empowered with their decision to grow their money with us. Because of this, we want to take you behind the scenes to share the reality of risk and how we bring you wins. Want to learn more about how Debut grows your money? We have another blog for that.

By cutting out the middleman and using new financial technology called decentralised finance, or DeFi, we’re able to outperform other market players and generate up to 10% targeted annual growth rate for our customers. In time, we see that DeFi will replace the inefficient and outdated methods of traditional finance. At the heart of all we do is this innovative and forward-thinking technology. It’s key to all the benefits we provide. And, as with all tech and investments, there are some risks. 

We have established and are maintaining sufficient processes that keep consumers’ best interests at heart. As a part of this promise, we’re here to explain in plain English the primary risks associated with the underlying technology, the tools of Debut, and how we work to make your experience of investing with DeFi safer and simpler.

1) Lending with digital assets

We secure every single loan with digital assets to ensure your money is safe. Generally at 125% of the loan value, these digital assets are automatically sold if they lose value or if there’s any chance the loan won't be paid back in full. This means the original investments are safely returned even if the borrower can’t repay the loan.

2) Digital assets volatility 

The price of digital assets can fluctuate, but in the case of Debut we’ve made sure this isn’t by much. We do this by using stablecoins only. Stablecoins are a type of digital currency that is directly linked to a value of real-world currency, such as the NZ or US Dollar. As a result, it isn't subject to the ups and downs typical in cryptocurrency and provides a level of stability that gives the currency its name. See our Risk Statement for further information on Stablecoins.

In addition to that, Debut applies professional portfolio and risk management techniques to digital assets to minimise cryptocurrency’s typical ups and downs. See our Risk Statement for further information.

3) Smart contracts and DeFi insurance 

The new financial technology of DeFi has an essential building block called ‘smart contract’. Smart contracts are a clever way to organise financial agreements and remove the manual requirements, and as a result human error, that can so often burden the traditional finance world.

DeFi loans or other DeFi digital asset transactions are organised through smart contracts, that have security built in. It's fully automatic and is designed to democratise financial products and bring more benefits back to customers. 

For example, a lending smart contract sets up every single loan to be secured by digital assets that are automatically sold if they lose value or if there’s a chance the loan won't be paid back in full. This protects original investments against the worst case scenario.

Although it's very unlikely, there’s a chance that the smart contract behind a DeFi loan breaks due to a bug. We protect against this risk by investing in DeFi insurance for every single one of our loans. It’s important to note that, as with any other insurance, DeFi claims are ultimately decided by the insurers.

4) DeFi platforms and applications

Debut investments are channelled through DeFi partner platforms that govern the lending and borrowing agreements or other digital asset transactions. For instance Compound is one of the biggest DeFi lending platforms currently running. These platforms are fully transparent and open systems by nature, unlike the traditional financial ecosystem.

Debut only uses the most qualified, trusted and reliable partner platforms. We have incredibly high auditing standards when selecting these platforms and also use tools to monitor their performance continuously. Even so, it’s important to know that if a partner platform suffers a security breach or another loss, you may also suffer a loss of some or all of your account balance. For an additional layer of protection and peace of mind, we invest in DeFi insurance wherever possible.

Other ways we make Debut safe

Here at Debut we put the security of your funds, and your bountiful returns, at top of the list. Here are some additional ways we make Debut safe:

  • We use an institutional digital assets custody and transfer solution. This gives us robust capability against cyber attacks, and is trusted by hundreds of digital asset businesses around the world.
  • All funds in the Debut app have bank-grade security standards at all times. We apply AES-256 security encryption standards to protect user data, and the Debut app requires a PIN to open as well as two-factor authentication. 
  • Debut only allows deposits and withdrawals from verified bank accounts to protect customers against fraudulent activity. 
  • The Debut app is tested by third-party auditors who conduct pen testing and check for vulnerabilities. 

Start small, grow fast

We hope this guide helped to answer your questions and gave an insight into potential risks and what we do to combat this. 

Investing involves risk - you aren’t guaranteed to make money, and you might lose the money you start with. We also hope it’s clear that we’re invested just as much as you are, and we’re doing everything we can to make Debut safe, reliable and profitable for you.

To see for yourself the power of DeFi, we have three simple Debut investment options:

  • Stack: Targeted annual returns - 5%, No min deposit
  • Build: Targeted annual returns - 7%, $3K min deposit
  • Boost: Targeted annual returns - 10%, $5K min deposit

There is no difference in the risk of investing in our different investment options. The different targeted returns reflect the different fees we charge for the different options. We encourage you to read up about all of the above in our risk statement and terms and conditions and make your own decision.

It takes less than five minutes to set up, with apps on the App Store and Google Play so you can stay up to date. Get started today.

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