Risk

Like any borrowing with leverage, BACK FINANCE has its own risk. Below is the outline of some risks each protocol user may face.

Risks faced by Yield Farmers

• Yield Farmers(no leverage or in the other words 1x) are exposed to impermanent loss risk.

  Note: This is the same risk as participating in other yield farming in AMM pools.

• Leveraged Yield Farmers (more than 1x) also take the risk of being liquidated: liquidation takes place when risk value reaches more than 100. Liquidation can happen when the value of your collateral drops or the price of your loan increases.

Risks faced by lenders

• Lenders share the risk of debts accrued by underwater positions in case liquidators did not liquidate in time. BACK incentivizes liquidators to carry out liquidation in a timely manner by rewarding them with bonuses.

  Note: This has not happened before.

• Lenders may delay the deposit withdrawal when fund utilization rate is high. A triple slope interest rate is adopted to improve utilization rate. When utilization rate exceeds 90%, both borrow interest rate and deposit interest rate go up significantly. This encourages borrowers to repay outstanding debts and lenders to make deposits, thus maintaining the pool at the optimal level.

  Note: yield farmers can borrow funds as long as they want with no fixed repayment period.

Contract risk

• We are doing our best to test our codes. Our codes are open-source and are available for anyone to check.

• Our code audit company has audit by professional contract,view the audit report.