Lending on Axly typically carries lower risks compared to other DeFi investments. However, it's important to be aware of that risks.
Temporary inability to withdraw
In situations where your deposited asset reaches ~100% utilization due to high borrowing demand, you might face withdrawal delays until farmers repay their loans or more lenders provide extra funds.
Nonetheless, the dynamic interest model triggers a sharp increase in the interest rate during these periods. This not only significantly boosts your income, but also leads to faster closure or liquidation of farming positions, thus returning the utilization to optimal levels.
During periods of extreme market volatility, there's a slim chance that the farming position's value might become insufficient to repay the debt if the position failed to be liquidated in time.
To counter this, Axly has cautiously defined key parameters to maintain a substantial buffer, making this risk scenario highly unlikely.
Smart contract risk
We do our best to prevent all possible attacks. However, the risk of exploit can never be fully eliminated. 3rd-party smart contracts like liquidity pools, farming and lending platforms also carry that risk.
Crypto assets are volatile and are subject to many risks, including but not limited to speculation, regulatory change, technology, and security risks. Any asset may be subject to large swings in value and may even become worthless.
Bear in mind, DeFi is a sector where unpredictable events can take place out of the blue. Be careful and do not invest all your savings or assets that would be devastating to lose.