⚠️Risk

Risk on Borrowing

🙀Liquidation: Yield farmers (Borrowers) who borrow asset with high leverage are able to face the risk of liquidation by the liquidator when their position jump into the terminator criteria. This relates to the debt ratio, known as % debt proportion per position's value.

This situation can be mitigated by using low leverage of borrowing, along with considering the market overview or market price of those assets pair and most important thing! Borrowers SHOULD close their positions before the %debt ratio hits over to be liquidated later.

🙀Impermanent Loss: Yield farmers can face with the impermanent loss issue when the price of at least one of those assets pair they farm change from before and there is Automated Market Maker (AMM) in the liquidity pool to rebalance the asset price.

This is a common case for all yield farming protocols

🙀High Borrowing Interest Rate:

When the utilization of that vault is high, yield farmers will face with the high borrowing interest rate, causing more chance for Borrowers to pay more interest, get higher debt position, and gain less profit than it should be from the pool. Users must carefully keep an eye on the utilization and timing to farm.

Risk on Lending

🙀Delayed Asset Return: Lenders have to handle with the situation when their deposited-asset returning is delayed since there is no returning time fixed. This depends on the utilization at that moment. If that asset vault is having high utilization% (estimated 90-100%), meaning Lenders won't be able to withdraw and will get their funds back delayed. However, the pro is Lenders will get high Lending APY%

This can be solved if there are more Lenders depositing their asset in that vault in order to make utilization% stays lower than 90% when there are lots of borrowing cases or if Borrowers eventually return their borrowed funds back.