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Define “Smart Contract Risk” in the Context of Lending Protocols

Risk of financial loss due to a bug, exploit, or flaw in the protocol's code, leading to fund loss or collapse.
Greeks.Live20.11.25

Define “Smart Contract Risk” in the Context of Lending Protocols.

Smart contract risk is the potential for financial loss due to a bug, exploit, or flaw in the underlying code of the decentralized application. In lending protocols, a flaw could allow an attacker to drain the liquidity pool, manipulate interest rates, or steal collateral, leading to an immediate loss of funds and a total collapse of confidence.

How Is ‘Smart Contract Risk’ Different from ‘Market Risk’ for a Treasury Asset?
What Happens If There Is a Bug or Exploit in a Smart Contract’s Code?
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What Is the Risk of a Bug in an Immutable Smart Contract?

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