Risks
Peridot pays more than a savings account because it carries risks a savings account doesn't. Here is the honest list — what each risk is, how the protocol mitigates it, and what remains yours to manage. If you read one docs page in full, make it this one.
Smart-contract risk#
Your deposits live in on-chain contracts. A bug in those contracts could lead to loss of funds — this is the irreducible base risk of all DeFi. Mitigations: the lending design follows the battle-tested Compound money-market model, code is audited (see Audits), and conservative parameters (collateral factors, reserve factors) leave buffers. Mitigated is not eliminated: never deposit more than you could afford to lose entirely.
Liquidation risk (borrowers only)#
If you borrow and your health factor hits 1.0, part of your collateral is sold at a discount. This risk is fully in your control: borrow conservatively, prefer stable collateral, monitor open positions. Pure depositors who never borrow are not exposed to it.
Liquidity risk#
Withdrawals draw on the pool's idle cash. At very high utilization a large withdrawal may have to wait for borrowers to repay or new deposits to arrive. The jump rate model exists precisely to make this state short-lived — above the kink, rates spike hard to refill the pool — but "instant, always" is not a guarantee the mechanism can make.
Oracle risk#
Collateral values come from price oracles (Reflector on Stellar). A wrong price could trigger wrongful liquidations or allow undercollateralized borrowing. Mitigations: redundant feeds and sanity bands; residual risk remains, concentrated in volatile-asset markets.
Stablecoin & peg risk#
USDC and EURC are issued by Circle, a regulated issuer with attested reserves — but they are issuer liabilities, not bank deposits. A depeg would flow through to positions denominated in them. There is no deposit insurance anywhere in DeFi.
Variable-rate risk#
- Supply APY can fall — sometimes sharply — when utilization drops.
- Borrow APR can rise while your loan is open, accelerating interest accrual.
- Neither is capped; both are visible live in the app before and after you act.
No advice, no insurance
Nothing in these docs is financial advice. Peridot is non-custodial software: it cannot reverse transactions, reimburse losses, or recover keys. Regulation of DeFi differs by jurisdiction and may affect your access or tax treatment.