🚨 WLFI has returned the $25 million borrowed from Dolomite, everyone can rest assured now, it was a false alarm!

It seems that this was an extreme test of the USD1 lending pool, and now with the return of assets, the leverage has essentially been alleviated.

Of course, during this process, there were no signs of decoupling for USD1, and I believe the resilience of U.S. Treasury + cash full reserves + the Trump's family capital endorsement is at play here;

However, this also reflects several common issues in DeFi protocols, which can serve as a reference for everyone:

1️⃣ Liquidity risk.

A firewall needs to be set up here to prevent large operations from a single address from causing an instantaneous impact on liquidity.

If the borrowing volume is too large, it will directly raise the utilization rate of the pool, making it difficult for other lenders to exit. If it happens, and depositors are restricted from withdrawing, the market will vote with its feet, so this needs to be noted.

2️⃣ Collateral quality risk.

Officials say there will be no liquidations, which only emphasizes their ability to add collateral; however, outsiders may question whether WLFI itself has enough depth in liquidity to handle effective pricing and disposal under pressure.

3️⃣ Conflicts of interest and governance perception risk.

Technical compliance and perceived compliance are two different matters; it should not give an impression of self-lending.

In summary, the core of DeFi is the safety of assets, followed by generating returns.

Hope WLFI @worldlibertyfi does better in the future.

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