DeFi lending is revolutionizing finance, but it’s not without risks. Before you dive in, here are the key points you need to know. Stay informed, stay safe. (1/13)🧵

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2/ Smart Contract Risk: Lending protocols run on code. If there’s a bug, hackers can exploit it and drain funds. Even audited protocols aren’t 100% safe.
Example: A hacker steals your $1,000 deposit via a code flaw.

Liquidation Risk: Borrowers provide collateral (e.g., $ETH). If its value drops too much, it’s sold to cover the loan.
Example: You borrow $500 with $1,000 ETH; ETH crashes, and your collateral is liquidated.

3/ Interest Rate Volatility: Rates in DeFi shift with demand. Returns or costs can change fast.
Example: Your 8% return today drops to 4% tomorrow if borrowing demand falls.

Liquidity Risk: If a protocol runs low on funds, withdrawals can be delayed.
Example: You can’t withdraw because most funds are borrowed or already taken out.

5/ Regulatory Risk: Governments may restrict DeFi access with new rules.
Example: Your country bans a platform, locking you out of your funds.

Governance Risks: Community votes can alter protocol rules, sometimes against you.
Example: A vote raises borrowing limits, increasing lender risk.

6/ Bridge Risks: Cross-chain lending uses bridges, which can be hacked or congested.

Example: A hacker exploits a bridge, stealing locked assets.

7/ Stay safe in DeFi lending:

• Start small (risk only what you can lose).
• Diversify across protocols.
• DYOR (research first).
• Monitor deposits and protocol health.
Knowledge is key.

8/ DeFi lending opens new doors, but the risks are real. Understand them, manage wisely, and prioritize safety to thrive in this space. Dive into the full blog -

8/ DeFi lending opens new doors, but the risks are real. Understand them, manage wisely, and prioritize safety to thrive in this space. Dive into the full blog - https://community.pike.finance/risks-of-lending-in-defi

9/ *This educational content prepared by community members is for educational purposes only and not financial advice. If you spot any inaccuracies, let us know!

4/ Oracle Risk: Protocols use oracles for price data. If they fail, asset values can be off, causing losses.
Example: A glitch misprices stETH, triggering unfair liquidations.

Systemic Risk: DeFi protocols are linked. One failure can ripple across others.
Example: A hacked LST token (e.g., stETH) disrupts loans across protocols.