Lending, borrowing, and the risks

On-chain lending cannot call a debt collector, so it substitutes collateral for trust: deposit $100 of ETH, borrow $70 of stablecoin. If the collateral's value slides toward the debt, anyone may liquidate you, for a fee, no court required.

The moving parts

• Interest rates set algorithmically by pool utilization.
• Health factor: collateral value over debt; below 1.0 you are liquidatable.
• Oracles: price feeds that tell the contract what collateral is worth.

A taxonomy of loss

1. Smart-contract risk: a bug lets funds be drained; audits reduce, never remove it.
2. Oracle risk: manipulate the price feed, and the protocol believes worthless collateral is valuable.
3. Liquidation cascades: falling prices trigger sales that push prices further down.
4. Governance risk: whoever controls the admin keys or the vote controls the rules.

You now hold the whole map: keys, stable units, exchange, credit, and the failure modes threading through them. Where you go next, protocols, auditing, building, is a matter of which edge of the territory pulls you.