Stella
  • Overview
    • 🌠Getting Started
    • 🤝Pay-As-You-Earn (PAYE) Model
  • Protocol Mechanism
    • ❓How Stella Works?
    • 🚀Stella Strategy
      • Why Stella Strategy is Unique?
      • Strategy Type
      • Asset Type
      • Strategy Exposure
      • Collateral Factor
      • Borrow Factor
      • Credits
      • Price Range & Liquidity Shape
      • Liquidation
        • Liquidation Discount
        • Post-Liquidation Value
        • Pendle/Penpie Liquidation Price
      • Price Impact
      • Leverage
      • Supported Strategies
    • 🏦Stella Lend
      • Why Stella Lend is Unique?
      • Pool Type
      • Supported Assets
      • Yield Vault
      • Withdrawal Delay
    • 💰Yield Calculation
      • PAYE Graph
      • Yield Sharing
    • ⚠️Risk Framework
      • Precautionary Measures
      • Slow Mode
  • App Guide
    • Walkthrough Stella APP
    • Open a position
    • Close a Position
    • View Your Position
    • Add/Remove Extra Collateral
    • Claim Assets from Liquidated Position
    • Deposit & Withdraw Assets
  • Developers
    • 📃Contract Addresses
      • Core
      • Stella Strategy
      • Stella Lend
      • Oracle
    • 📜Contract ABI
    • ⚙️API
  • Tokenomics
    • 🎯ALPHA Token
    • ⚡Staking & Protocol Fees
    • 👥Token Distribution
  • Additional Information
    • 🟠About Stella
    • 🔎Audit Reports
    • 📣Community Links
    • 📸Media Kit
    • ❔FAQ
    • 📖Terms of Use
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  1. Protocol Mechanism

Risk Framework

PreviousYield SharingNextPrecautionary Measures

Last updated 1 year ago

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.

⚠️
Precautionary Measures
Slow Mode