What risks come with DeFi lending?

Asked 3 years ago

Hi. DeFi lending seems like a great way to earn some passive income, and I've been looking into it. Before I take the plunge, I want to be fully aware of what I'm getting myself into. What are some of the risks associated with DeFi lending? Thanks in advance.

Defi Defi loans Decentralized finance Crypto lending

Wilbur Padilla

Monday, April 25, 2022

Like every other investments, DeFi lending has its risks. The biggest of them all is the smart contract risk. There is also the risk of high fees or liquidation if the asset becomes to volatalie and the collateral factor is increased without enough funds to cover for it. For the smart contract risk you just have to ensure that you are interacting with trusted and audited contracts and that the projects have know founders who have taken it through KYC. Looking at it closesly there seem to be more risk in not taking advantage of the opportunities offered by DeFi lending. 