General

In this paragraph, we describe the general risks associated with interacting with the protocol.

Blockchain Infrastructure: Since the protocol is deployed on an Ethereum Layer 2, it naturally inherits all the risks associated with this infrastructure.
Smart Contracts & Financial Attacks: Although the protocol has been audited by reputable industry auditors, this does not guarantee that the code is 100% free from bugs or potential economic exploits.
Oracle Risk: The protocol’s operations depend on inputs from an external oracle, which is therefore a core component of its financial mechanism. Even though several safeguard measures have been implemented, any manipulation of the oracle could cause damage to the protocol.
Stablecoin Depeg: Stablecoins are currently the only means of collateralizing operations within the protocol. Every participant interacting with the protocol must consider the risk of stablecoin depeg, even for well-known stablecoins, and fully assume the risk of a potential reduction in the value of these assets.
Low Liquidity Scenario: Any participant interacting with the protocol by opening a position is exposed to the risk of having to close that position in a low-liquidity scenario, potentially being forced to pay arbitrarily high slippage in order to exit the position.

The protocol includes internal limits (MMR thresholds, margin checks, liquidation mechanisms) to reduce systemic exposure.
Trader and LP incentives are aligned through the dynamic virtual AMM (DynAMM) model, designed to maintain fair funding rates and balance between long/short sides and so the LP exposure.
Vaults are isolated per market, preventing contagion between different pairs.