Risks and Disclosures

What are the risks of using Quill?

Using Quill, like any DeFi protocol, carries certain risks. These include liquidation risk (if collateral value drops too low), smart contract risk (potential vulnerabilities in the protocol’s code), and market risk (price volatility affecting collateral). Users should assess their risk tolerance, monitor collateral ratios and be familiar with protocol mechanisms before engaging.

Is there a risk of losing collateral?

Yes, there is a risk of losing collateral if it becomes under-collateralized. If the value of the collateral drops below the minimum required collateralization ratio, the protocol may trigger liquidation to protect the stability of the $USDQ stablecoin. During liquidation, a portion or all of the collateral will be used to cover the outstanding debt, resulting in potential losses for the user.

How does Quill manage volatility risks?

Quill manages volatility risks through its collateralization requirements and automated liquidation process. Users must maintain a sufficient collateralization ratio to avoid liquidation and the protocol automatically liquidates under-collateralized positions to protect overall system health. Additionally, by supporting only highly liquid and reputable assets (such as wstETH, weETH, wETH and SCR), Quill mitigates exposure to extreme volatility.

What should I know about DeFi risks in general?

In DeFi, risks include smart contract risk (vulnerabilities in the code), protocol risk (potential for governance or operational issues), market risk (fluctuations in asset prices) and liquidity risk (availability of assets during high demand). Users should be aware that DeFi protocols are often experimental and should only use funds they’re willing to risk. Staying informed, following project updates and using well-audited platforms can help mitigate some of these risks.