7. Risks

Like any leveraged loan, PILOT has its own risks. The following is an overview of some of the risks that users of each protocol may face.

a. Mining and liquidity providers with high yields (without leverage, in other words 1x) face the risk of impermanent loss. Note: This is as risky as participating in other farming or liquidity opportunities in the AMM pool.

b. Leveraged yield farming and liquidity providers (more than 1 times) also have the risk of being liquidated, because Pilot will borrow tokens to generate farming yield or provide you with leveraged liquidity when borrowing. Liquidation occurs when the debt ratio (debt/position value) reaches the liquidation debt ratio. 80% of the HT/DAI pool, which may happen when the value of your position drops. When the price of another token (e.g. DPI/HT pool DPI) drops sharply compared to HT or when the price of HT increases sharply compared to another token, the value of the position drops. *Please refer to the "Key Parameters" section to understand the liquidation debt ratio of each pool.

c. If the liquidator does not liquidate in time, the money lender bears the debt risk arising from the underwater position. Note: This has never happened before.

d. The liquidator takes the risk of being preempted by other competitors and obtains rewards and reinvestment from the liquidation. If it is a preemptive strike, the liquidator does not need to pay gas fees (maybe the gas price is high).