This was an interesting lending opportunity at 40% (already ended) and now at 20%. But that’s the ceiling and will fall as subsidies are removed. The only way back to 20% is at 100% utilization, which means illiquid. The borrowers are also concentrated - it’s basically Rune. From a borrower risk profile, he’s extremely well collateralized. But also has shown preference for offramping all the loan and any staking income. So illiquidity is a major risk if he remains 90%+ of the borrow side. This loan’s interest has only been PIK to date, which lowers liquidity over time for lenders. It also means realistically this is poorly secured. In the unlikely event he gets liquidated, that’s pretty much it. Sky would need to intervene or accept nuked token. There is also the very real risk of governance. The main borrower also has the keys to change what rate you pay. There’s little to prevent lenders being stuck in an illiquid loan at 1%, for example. Lenders will need to monitor governance to front run any material changes, and even then will need liquidity. So on balance, this is a loan to a founder against his tokens, where the founder controls the oracle and rate he pays, and even if everything remains honest there’s just no way to quickly liquidate the collateral. There’s a reason Sky is moving this off their own balance sheet. Lenders are refinancing Sky’s $50m loan to its founder. So at 20%, you’re probably compensated for risk, but this is one you want to monitor if you stay in it, especially as rates fall into low teens.