Risks
Plain-language, no fine print. If anything here is unclear, ask in the TG community group before depositing.
For option buyers. You can lose 100% of the premium paid — this is the normal, expected outcome for out-of-the-money expiries, not an edge case. Payouts are capped: you will not be paid for the portion of a move beyond 5% above your strike. Settlement uses an oracle price at a fixed time; a favorable price five minutes before expiry that reverses by the settlement print pays nothing.
For dCDS depositors.
Market risk on your own asset. An ETH deposit falls in dollar value when ETH falls, exactly as holding would. Premiums cushion this; they don't remove it.
Capped payout risk. When markets rally past strikes, in-the-money payouts are deducted from the pool. Because the pool underwrites more contract notional than raw deposits (made safe by the cap), a strong rally can cost a meaningful fraction of your deposit's asset balance — bounded, displayed live as your "worst case," but real. In a maximum scenario where every live contract pays its cap, your deposit is reduced to the worst-case figure shown on your dashboard, plus all premiums earned.
Liquidity windows. Funds backing live options are locked until that expiry settles. With short-dated options this is days, but it is not instant.
Smart contract risk. Contracts are audited by Sherlock (see Audits & Contract Deployment) but audits reduce risk, never eliminate it. Never deposit funds you cannot afford to lose.
Oracle risk. Settlement depends on oracle prices. Oracle failure or manipulation, while mitigated by using established feeds, is a non-zero risk inherent to all on-chain derivatives.
What cannot happen, by design. The pool cannot owe more than it holds — every option's maximum payout is reserved against pool capacity when sold, enforced on-chain. Buyers cannot be liquidated or margin-called. Depositors cannot lose more than their deposit.
Last updated