Risks

All DeFi protocols, including iLend Protocol, come with risks, which are important to understand before depositing significant amounts of crypto. The main risks involved in using iLend are outlined here.

Smart Contract Risk

This is a risk that the iLend smart contracts get exploited to steal or permanently freeze funds. This risk is inherent to all smart contracts and can never be fully eliminated, but can be mitigated in various ways.

• iLend has undergone audits.

• iLend plans to release a bug bounty program which will pay community members if a critical vulnerability is found, in order to encourage responsible disclosure rather than hacking.

100% Utilization Risk

When an asset is fully utilized (100% of supply is lent out), there are no tokens left in the pool, which means that withdrawals and borrows will fail. Users have to wait until the utilization rate goes down, either through some users repaying their loans or depositing new funds.

A user is more likely to be affected by this if their deposit represents a large share of the pool, or if the asset has extremely high borrow demand.

Oracle Risk

iLend relies on Pyth for their price feeds to power liquidations. There is a risk that these oracles report incorrect prices, causing wrongful liquidations.

Liquidation Risk

iLend offers over-collateralized loans, which means loans must be backed by collateral of greater value than the loan. If the value of the collateral dips below a threshold (determined by asset LTVs), a user's position will be liquidated with a liquidation penalty.

Untimely Liquidation Risk

In the event of large-scale liquidations or market turmoil, there is a possibility that assets liquidated are unable to cover the loans taken out by the liquidated user. The shortfall "or negative balance" is treated as "bad debts". iLend manages this proactively by isolating newer or riskier tokens in Isolated Pools and managing deposit limits or collateralization ratios to keep the protocol safe.