Risks

Like all DeFi protocols, AlphaLend comes with inherent risks. Understanding these is essential before depositing significant capital. Below are the primary risk categories users should be aware of:

Smart Contract Risk

Even with comprehensive security audits and high-level security protocols, smart contracts remain susceptible to potential vulnerabilities. Any detected flaws in the code could lead to significant fund losses.

100% Utilization Risk

When an asset pool is fully utilized—meaning all supplied liquidity is lent out—users will be temporarily unable to withdraw or borrow that asset. Withdrawals will only succeed once loans are repaid or new liquidity enters the pool.

Oracle Risk

Our protocol depends on decentralized oracle networks to determine real-time asset prices for accurate collateral valuation and liquidation. If an oracle provides incorrect or delayed data, it could trigger unintended liquidations or block legitimate actions.

Liquidation Risk

All loans are overcollateralized. If the value of a borrower’s collateral falls below the required threshold, their position will be liquidated, incurring a penalty. This is a standard mechanism to maintain solvency and protect lenders.

Untimely Liquidation Risk

In highly volatile markets or periods of mass liquidation, collateral may not be sold quickly enough to fully cover the borrower’s debt. This may result in a shortfall, or “bad debt,” that the protocol needs to absorb or manage.

Regulatory Risk

The regulatory framework governing cryptocurrencies and DeFi platforms is in flux. Future regulatory changes could negatively impact the functionality of AlphaFi and its vaults.

At Alphalend, we take a proactive approach to risk management through careful protocol design, ongoing audits, and strong security practices. While we strive to reduce risk wherever possible, it's important to recognize that no system can eliminate it entirely. We strongly encourage users to assess their personal risk tolerance and investment goals before interacting with the protocol.