#termmax Many people choose lending pools and focus on the annualized rate at first glance. But have you considered what happens when you really face a major drawdown? Even a great-looking interest rate may not be able to save your position.

Think about it: if the market suddenly crashes, how does the lending system handle liquidations? The traditional approach is very straightforward—after the collateral is liquidated, it’s simply sold into the market. But during a sharp drop, liquidity is already thin; when a large batch of collateral gets dumped at once, the price keeps falling as more collateral hits the market, and the cascade of liquidations is triggered. Many people have probably lived through this and felt it firsthand.

So does TermMax physical delivery help you bypass this problem? It doesn’t “dump” assets into the market; instead, it transfers the collateral directly to the lender. It seems to avoid the sell-off panic. However, here’s a very realistic point: what the lender receives is not a stablecoin, but the collateral asset itself. After that, whether you sell it or hold it is up to you to manage. When I first came across this mechanism, I almost overlooked this detail.

The whole system runs on three types of positions: GT, FT, and XT. The borrower’s GT holds both collateral and debt; once conditions are triggered, it enters liquidation/settlement. The lender’s FT is a zero-coupon claim bought at a discount, with repayment relying on the collateral assets held by the GT. XT simply strips out the time value; as it approaches maturity, its value keeps declining.

So can lenders still just look at yield? Probably not. If the counterparty liquidates and the assets fall into your hands, can you accept them? For highly volatile underlying assets, that bit of interest may not offset the losses. In my own screening of pools, I’m fairly conservative: I treat high yield by default as a risk premium, and I prioritize mainstream collateral with more conservative collateral ratios.

That said, does physical delivery mean you’re completely worry-free? Definitely not. Oracle delays, price gaps, and loopholes in the contract are still roadblocks. The mechanism can only shift risk—it can’t completely eliminate it. @TermMax Vote: When you choose a lending pool, what do you prioritize most?