⚠️Risk Framework
A risk framework is crucial because it helps identify and manage potential risks, protect funds, and enhance the overall protocol’s resilience. Besides multiple smart contracts audits by trustworthy entities
But in the end, It's crucial for users to understand these risks before participating in any lending pool.
Underlying Smart Contract Risks: The Lending Pool is built on top of integrated/underlying contracts of various protocols. If an unfortunate event occurs, there are implications for the lenders.
Risk Separation: The Hyper and Standard Lending Pools operate with distinct risk profiles. While the Hyper Pool is associated with higher-risk assets and strategies, the Standard Pool is more conservative. Changes/events in one pool won't affect the other.
Loss Socialization: In the event of such a bad debt, the loss will be socialized among all the lenders in the pool. This means that all lenders share the burden of the loss.
Both the Hyper and Standard Lending Pools offer unique opportunities and risks. It's essential for users to assess their risk tolerance, understand the nuances of each pool, and make informed decisions.
Last updated