What Lenders Should Know

Your risk profile depends on which tranche you choose. Senior lenders are protected by both the Insurance Fund and the Junior Tranche before any loss reaches them. Junior lenders earn a higher yield in exchange for absorbing losses after the Insurance Fund is depleted. Neither tranche is directly exposed to individual borrower default, because every borrower is over-collateralized at the protocol level and liquidation is automated.

Both tranches are exposed to the standard risks of any stablecoin you hold (issuer, peg). This is no different from holding stablecoins anywhere else.