All investments have some degree of risk, but as an emerging technology DeFi's risks are unique.
Technology Risk: Donut and all DeFi businesses rely on Ethereum's infrastructure to operate. If a smart contract (such as one governing a lending-borrowing agreement) or a stablecoin (such as USDC) were to fail or break, then your funds and many businesses would likely be affected.
Partner Platform Risk: Donut works exclusively with the most trusted, qualified partners in the space to give you access to the best earning opportunities. As with any software platform, they run the risk of bugs or hacks creating failure. Depending on the bug, you could have issues accessing invested funds for a few hours, or in a worst case, lose your principal. Fortunately, extensive auditing and security measures are in place to prevent this.
Lending Risk: In every securities lending market there is a risk that a borrower defaults. When your funds are lent in decentralized money markets, our lending partners mitigate this risk by requiring 125% collateral or more from borrowers. In the case of a default, the lending partner may liquidate this collateral so you can withdraw your funds.