As with any decentralized protocol, there are some risks to consider before using the Drops Loans protocol.
This includes smart contract risk, which involves the possibility of a bug within the protocol’s code. Drops DAO will undertake the appropriate measures including third-party audits to minimize this risk, however there is always a non-zero chance that a bug may remain.
There is also a liquidation risk associated with using the borrowing function in the protocol. Users are clearly communicated collateral ratios and limits, which will need to be adhered to in order to avoid liquidation of the collateral.