Had a call this week with one of the bigger DeFi liquid funds. They have pulled out of DeFi lending entirely. Their reason was, As a lender, you carry the full notional risk of the position, and you are not paid for it. On the other side. Borrowers earn looping APRs. And when a collateral asset gets hacked, the RWA issuer steps in and makes the borrowers whole. Lenders eat the loss. I have been thinking about this ever since. I get it when a lending protocol gets hacked. That is venue risk. Lenders chose the venue, they bear it. Fair. But when the collateral itself gets hacked, why is only the borrower saved? The lender is the reason the issuer has a business. No lending liquidity means no leverage, no looping APR, no AUM growth. The issuer earns because of the lender. The borrower earns because of the lender. And the lender is the one left holding the bag. If we want institutional money to stay in DeFi lending, both sides need to take the hit when collateral fails. Not just the side that was already being paid better.