# MakerDAO risks of perpetual yield strategy discussion

Source: https://forum.makerdao.com/t/risks-of-perpetual-yield-strategy-discussion/23880

## Summary

The poster outlines three major risks of the perpetual yield (cash and carry) strategy in MakerDAO, while noting they are not an expert. The first is a custodian hack that could cause a total loss of BTC or ETH, which the poster calls very unlikely because custodians are professional institutions with robust security. The second is ongoing operational losses from bad trading, such as quoting wrong prices, or from sudden liquidations and slippage, which are continuous rather than a sudden wipeout. The third is a black swan event where crypto prices fall far beyond historical levels, which could cause a significant loss of collateral if centralized exchanges also commit fraud, and on-chain lending would also face major risk.

## Article

Risks of perpetual yield strategy discussion

The purpose of this thread is to have an in-depth discussion and understanding in the community about what the perpetual yield (cash and carry) strategy is, and what risks it has.

I’m not an expert but I would outline 3 major risks that are important to understand:

Custodian gets hacked. The worst case scenario is that the custodian where the crypto is stored gets hacked, and all of the BTC or ETH is stolen by a hacker. This would result in a 100% loss of funds, however it is a very unlikely event, especially given that custodians are battle-tested, professional institutions whose only job is to custody crypto, so they have very strong and robust technical security setups to prevent any chance of a hack.

Slippage from bad trading, or sudden liquidations. During regular operations, a lot of operational issues can occur. This can include bad trading, such as quoting the wrong prices, or taking losses due to sudden liquidations and losing money to slippage. This type of risk is continuous, and doesn’t result in a sudden wipeout of all or a large amount of the exposure.

Black swan event where crypto goes to 0. In a situation where there is a serious systemic black swan that affects all of crypto and makes price fall significantly beyond what has ever been observed, it is possible to lose a significant chunk of the collateral if the centralized exchanges have also committed fraud, however in such a black swan scenario on-chain lending will also be at major risk of significant loss.