Risk

There are a few risks to consider when shorting on Vanilla:

Liquidation risk is the risk that your dump position is liquidated due to insufficient collateral from the market moving against you.

Oracle risk is the risk that the oracle quotes an incorrect price, causing liquidation when it shouldn't have.

Squeeze risk is the risk that cascading short liquidations cause forced buying pressure, causing a rapid increase in price.

For lenders, there is a different set of risks.

Utilization risk is the risk that withdrawals are not available due to all the tokens being lent out.

Bad debt risk is the risk of some accounts being left with more debt than collateral after liquidation, which may result in a socialized loss.