Risk Comaprison

Shoebill's mechanism has some risks that are not present in existing lending protocols. At the same time, risks that exist in other lending protocols are not found in Shoebill. This page describes the unique risks of lending or depositing through Shoebill.

For a more general understanding of the risks associated with DeFi lending, take a look at Aave's Risk Framework here.

New Risk

Shoebill collateralizes LST deposited on third-party platforms. If one of these platforms were to be hacked, borrowers could potentially lose their collateral and be unable to repay their creditors. To manage this risk, Shoebill carefully selects third-party platforms by reviewing the following factors:

  • TVL (Total Value Locked)

  • Operation Duration (Protocol-wise and specific strategies)

  • Audits

  • Security Record

  • Authorities (Governance, Multisig)

  • Finance risks for the strategy (ex: reward distribution method)

Please refer to the disclaimer for damages and loses when using Shoebill.

Reduced Risk

In traditional lending protocols, collateral is lent to the borrower. Let's say a borrower uses USDC as collateral for an ETH loan. If the price of ETH suddenly increases relative to USDC, the borrower may need to be liquidated. However, if almost all of the USDC in the lending pool is lent, there may not be enough USDC locked in the protocol's smart contracts to liquidate. As a result, the system will go bankrupt.

Shoebill reduced this risk by not lending collateral to other users within the protocol except special cases. Shoebill also minized the risk of liquidation and bad-debt by lending assets based on same type of liquid stake assets.

For example,


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