All investments have some risk, but DeFi has some unique additional risks as an emerging technology. While Pen-X makes every effort to reduce risk as much as possible, members must understand the risks involved.
Like all DeFi platforms, Pen-X relies on the Ethereum network to function. If a smart contract were to fail due to a bug, Pen-X and other businesses relying on it would also fail.
Pen-X operates exclusively with the most trusted, qualified partners in the DeFi space to ensure long-term operational integrity within the Fund and its governing Pen-X DAO.
However, as with any software platform, these partner platforms run the risk of bugs or hacks leading to failure. Depending on the bug, you could have issues accessing invested funds for a few hours or, in the worst case, lose your principal.
Fortunately, extensive auditing and security measures are in place to try our best to prevent this.
Some of the Pen-X Funds' capital is invested in securities lending markets; an inherent risk exists that a borrower could default. Pen-X's lending partners require at least 125% collateral from borrowers to mitigate this risk. In the case of a default, this collateral would be liquidated, allowing funds to be withdrawn.