Choosing Pools

Users should be careful when choosing a pool to use — below are some things for the users to pay attention to:

• Check if the pool supports the asset they want to lend, borrow, or collateralize.

  • Assets supported for lending and borrowing will have a liability factor above 0 and show an interest rate above 0.

  • Assets supported as collateral will have a collateral factor above 0.

• Ensure the pool has a well-capitalized backstop module.

  • The backstop module is a fund of assets insuring the pool against bad debt. Well-capitalized backstop modules denote a pool being relatively safe, as backstop module depositors will not want to insure unsafe pools.

  • If a large percentage of the backstop module is queued for withdrawal, the pool is probably in an unstable state — and the user should avoid it for the time being.

• Ensure the assets supported as collateral in the pool are safe collateral assets.

  • Generally, low volatility and high liquidity assets make good collateral.

• Ensure the pool's risk parameters are set appropriately.

  • The pool should have reasonable collateral and liability factors for supported assets.

• Ensure the pool's oracle contract is reliable.

  • Lending pools rely on oracles to fetch asset prices — users should always be sure the oracle for their lending pool is reliable, or their assets may be lost.