Risks
Last updated
Last updated
As with all DeFi platforms, there are certain risks associated with using HyperLend, and users should be aware of them before engaging with our platform. We strive to protect user assets to the best of our abilities, but no system is completely safe.
Our smart contracts have undergone rigorous auditing processes conducted by reputable auditors, including [TBA]. We will also provide a bug-bounty program, available at Github. While these audits significantly mitigate risks, residual vulnerabilities may persist despite our best efforts to eliminate them entirely. Additionally, our smart contract will undergo extensive "battle-testing" through prolonged periods of both test-net and real-world deployment and a high volume of transactions. This phase aims to mature the code by exposing it to various scenarios and interactions, thereby refining its reliability and security.
Since HyperLend allows the borrowing and lending of volatile tokens, there is always a market risk. The most common risk is a rapid devaluation of an asset used as collateral. If the protocol is unable to liquidate unhealthy loans, it will result in bad debt (a situation where the market value of total debt is greater than the value of collateral, making the protocol insolvent). To mitigate this risk, we carefully consider which assets to list, considering both on-chain (DEX) and off-chain (CEX, OTC) liquidity.
The protocol offers multiple types of pools, Core Pools where multiple assets are available in a single market, Isolated Pools where each market consists of only 2 assets, and P2P Pools, where loans are completely isolated to the lender and borrower.
Given the rapid changes in the liquidity and volatility of cryptocurrency tokens, there is a need for constant re-evaluation of listed assets. We assess volatility risk by measuring the normalized fluctuations in token prices, calculated as the standard deviation of the logarithmic returns. This method involves evaluating the volatility as , which conforms to industry standards adopted by platforms like Bitmex and Gauntlet. Volatility and liquidity are assessed weekly, but we also have automated notification systems that monitor market conditions 24/7.
