correct me if i am wrong because i have never used this feature but the way i see it is this way:
- people borrow money on poloniex for trading, right?
- so imagine someone borrows 1BTC from you and promises to return it with profit 1BTC+profit in a week.
- then he buys xyz coin @0.01BTC so he has 100 xyz
- the next couple of days xyz coin gets dumped real hard that the price goes down 50% down to 0.005BTC and we all know this happens so often in altcoins.
- now your 1BTC is turned into 0.5BTC since the borrower can no longer pay you back he leaves poloniex and never comes back to his account ever again
* now what are you going to do?
Polonex will issue a margin call prior to the borrowers account reaching a zero equity status, and will force liquidate a borrowers position before the borrower is anywhere near zero equity. Polo also only allows for margin lending for a few select altcoins with generally high licquidity.
There is the risk that Polonex could get hacked and there is also the risk that Polonex's risk management policies are insufficient to prevent lenders from loosing money in the event of a very quick crash in price of a coin.