Risk and Security

It is crucial for users to understand the potential risks associated with utilizing Loanshark Core and to conduct their own research (DYOR) before committing funds. This page outlines some, but not all, of the risks involved.

Types of Risks

When using Loanshark, users should be aware of both endogenous and exogenous risks, as they can impact the loss of funds and collateral liquidations. Let's take a closer look at these risks:


Smart Contract

Collateral Assets


Bad Debt

Our Endogenous Risk Mitigation Practices

Smart Contract Risk

  • Audit: To ensure the protocol operates safely and as intended, an independent security audit is currently underway. Once completed, the results will be published transparently on this documentation site to maintain openness and build user trust. For the latest audit findings or to discuss protocol security, please contact the development team through the Loanshark Discord server or GitHub repository.

Centralisation Risk

  • DAO transition: Eventual DAO transition with transparent onchain governance

Our Exogenous Risk Mitigation Practices

Collateral Assets Risk

  • Selective whitelist: Loanshark maintains a whitelist of conservative and trusted assets with higher market caps for collateral, ensuring a safer initial ramp-up phase.

  • Dynamic Interest Rate and Reserve Ratios: Parameters are customized for different assets and pools, allowing flexibility and risk management.

Bad Debt Risk

  • Interest Curve: Varying optimal utilisation rate (65-90%) reflective of asset and debt risk

  • Liquidator Incentive: Fixing liquidator discount for all collateral across the protocol

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