From the Bitfinex website:
"You are not exposed to exchange risk when you lend with Bitfinex. The exchange risk is taken on by the trader, and, in case his position loses money, he will cover the loss with funds in his trading wallet. If a trader loses more than his balance can cover, liquidity providers can lose part of their funds. To ensure against losses liquidity providers can use insured credits (see FAQ for more information). "
https://www.bitfinex.com/pages/howitworks#lendingFrom their FAQ:
"What are the risks of providing liquidity?
The risks are low.
We have taken the following steps to avoid that liquidity providers are losing money:
- If a trader's position is at a loss he will cover the loss with funds in his trading wallet. The funds in the trading wallet serve as collateral only.
- A trader's position is forced liquidated when the net value of his account falls below the required margin.
- In case of a flash crash event and if the market doesn't allow the trader's position(s) to be liquidated fast enough the uninsured swaps may not be fully repaid.
- If this happens the losses will be equally shared among all uninsured swaps."
Seems to me that you are not 100% risk-free providing liquidity at Bitfinex, but you seem to be able to insure these risks. Do you plan to work with Bitfinex?
