> For the complete documentation index, see [llms.txt](https://docs.usefarlight.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.usefarlight.com/risk/lessons.md). # Four failures that shaped the design Maple, Goldfinch, Centrifuge and Edel Finance each lost money for a specific reason. What each failure taught, and where the answer is built into Farlight. Moving lending on-chain changes settlement. It does not change credit risk. Between 2022 and 2026 several protocols lost sight of that distinction, and the record of what went wrong is exact. Farlight was designed with that record in view, as a guide rather than something to argue with. ## The four cases ### Maple Finance and the Orthogonal Trading default (December 2022) | | | | -------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | | Loss | Around $36M, close to 30% of Maple's book | | What happened | Orthogonal Trading borrowed from Maple's uncollateralised pools, misstated its exposure to FTX, and defaulted when FTX collapsed. | | Lesson | Never lend unsecured to a counterparty whose books are closed to you. Maple has since moved to about 165% collateralisation with collateral held in custody. | | Where it lives in Farlight | Every loan is overcollateralised and the escrow contract holds the assets. Borrower disclosure is not relied on, because nothing about the loan requires it. | ### Goldfinch's borrower defaults (2023 to 2026) | | | | -------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Loss | Around $18M across Tugende, Stratos and Lend East; GFI fell 99.8%; the platform entered maintenance mode in June 2026 | | What happened | Emerging-market borrowers, held only by off-chain covenants, defaulted. Recovery was slow and partial; Lend East returned roughly 42%. | | Lesson | A chain cannot enforce a covenant. Off-chain recovery is a legal process measured in years. | | Where it lives in Farlight | Recovery is a Dutch auction that any address can start and that clears in about 45 minutes. There are no covenants to enforce; the collateral is the enforcement. | ### The ConsolFreight and Harbor Trade pools on Centrifuge (2023) | | | | -------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Loss | Around $4M, including MakerDAO's exposure | | What happened | Trade-finance pools carried concentrated obligor risk. When the obligors failed, redemptions were frozen for months. | | Lesson | Concentration is lethal, and in a pooled structure a freeze reaches every participant. | | Where it lives in Farlight | Per-token caps keep concentration down. Slices are isolated, so one bad position freezes nothing but itself. Without a pool there is no redemption queue to freeze. | ### Edel Finance and the wGOOGLx exploit (July 2026) | | | | -------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | | Loss | Around $403K of bad debt | | What happened | Chainlink's oracle for tokenised Google stock was accurate. A wrapper token's exchange rate was pushed 78 times higher and counted as collateral value. | | Lesson | Value the exact token you hold. Any derived rate is an attack surface. | | Where it lives in Farlight | `PriceGate` is configured with the feed for the escrowed token and nothing else. Wrappers, vault shares and derived rates are never accepted as collateral. | ## The common thread Each of these failures comes down to one of three decisions: lending without security, relying on enforcement off-chain, or valuing something other than the asset actually in hand. Farlight excludes all three at the design level. 1. **Overcollateralised loans only**, backed by liquid, oracle-priced collateral held on-chain. 2. **Smart-contract recovery only**, through auctions that depend on nobody's cooperation. 3. **The escrowed token is priced directly**, never through a wrapper, using Chainlink feeds behind the protocol's guards. What remains is issuer risk, market gaps, the sequencer and the contracts themselves. Each is real, and the other pages in this section take them one at a time with the control that answers it. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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