Position Risks

This page explains the remaining risks clearly and how the protocol manages them.

What Is Not a Risk

To be explicit, Locked Yield positions are not exposed to:

  • Variable interest rate swings

  • Lending pool utilization spikes

  • Sudden changes in market APRs

Once your rate is locked, it stays locked.

Collateral & Liquidation Risk

Locked Yield positions are still collateralized positions.

If the value of your collateral falls far enough, liquidation can occur—just like in any lending system.

What’s different:

  • Health factors are calculated portfolio-wide

  • Interest rate exposure is already hedged

  • Risk is measured on sensitivity, not raw notional

This makes liquidation risk more stable and predictable than in variable-rate systems.

Early Exit Risk

Locked Yield positions are designed to be held until maturity.

If you exit early:

  • The position is unwound at current market rates

  • The realized result may differ from the locked APR

  • Gains or losses depend on how rates moved since entry

Early exit is a market action, not a guarantee.

Liquidity & Execution Risk

When positions are opened:

  • The protocol selects the best execution path automatically

  • Direct matching is preferred

  • Synthetic structures are used when needed

In extreme conditions, execution quality may vary, but the protocol always prioritizes:

  • Rate certainty

  • Capital preservation

  • Continuous solvency

Protocol & Smart Contract Risk

As with all on-chain systems:

  • Smart contract risk exists

  • External protocol dependencies may introduce risk

  • Extreme market events can stress assumptions

XCCY mitigates this through:

  • Conservative risk limits

  • Internal hedging

  • Tranche-based liquidity backstops

But risk cannot be fully eliminated.

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