Risks for Lenders
While leveraged yield farming carries some risk, it is commensurate with the high rewards that can be gained. On the other side of the coin we can examine lenders, who undertake less risk than the farmers they lend to, but nonetheless should be aware of some pitfalls. While we intend to make the lending process as easy and secure as possible, no investment is without some risk, which is why we are here to clearly outline some of the things you should look out for.
As we have mentioned in our doc on yield farming myths, lenders cannot be liquidated. Similarly, the liquidation thresholds for borrowed funds that are written into our smart contracts keep lenders safe; however, extreme market volatility can cause these positions to not be liquidated in time. Note that this is a very unlikely scenario.
If at any time you wish to stop lending, you can withdraw your funds in a few clicks; however, there may be a slight delay with them being delivered to your wallet if the pool utilization rate is extremely high. This occurs when the amount being borrowed from a lending pool comes close to matching the total value of the pool.
In order to avoid this as much as possible, we employ tiered interest rates; that is, beyond 90% pool utilization, lending fees increase on a steep scale up to 150%. This has the effect of encouraging both lenders who can benefit from greater APY, and farmers who become more motivated to pay off outstanding loans.
As seen in recent high-profile project hacks, smart contracts can be vulnerable to exploits leading to stolen funds. To counter this, more projects are doing their best to conduct internal and external audits.
PembRock greatly minimizes any chance of smart contract exploits due to its internal testing, and the fact that we have hired two respected companies — BlockSec and Certik — to produce comprehensive reports. Both companies have lots of experience in undertaking smart contract audits. What’s more, we also make sure any integrated projects follow the same high standards that we ourselves abide by.
Having just launched and handling the transactions of many users, some have experienced corner cases, including:
- Temporary inoperability or the freezing of funds
- Gas usage errors
- NEAR wallet maintenance
- Other cases of maintenance concerning third-party resources; for example, RPCs and nodes.
We would like to assure you that all funds on PembRock Finance are secure, and we are continuously working on improving user experience so that such situations do not occur in the future.