Risks

Risks & Challenges

A decentralized exchange (DEX) like World involves a variety of technical, operational, regulatory, and liquidity risks. Below we outline the major challenges and our approach to mitigating them.

Technical Risks

On-chain decentralized exchanges depend on smart contracts and blockchain infrastructure, which introduce several risks:

• Smart contract vulnerabilities

  • Coding errors or exploitable logic flaws can lead to hacks or loss of user funds, as seen in past DeFi exploits.

  • Mitigation:

    • Automated tests with high coverage

    • Independent code audits

    • Careful code review and secure coding practices

• Network congestion & high gas fees

  • On older or slower chains (e.g., Ethereum mainnet), peak activity can make trading expensive and slow.

  • World is designed only for a low-latency, high-throughput, extremely cheap blockchain. It is deployed on MegaETH.

• Oracle dependencies

  • Manipulated or delayed price feeds can cause inaccurate pricing or arbitrage attacks.

  • Mitigation:

    • Careful monitoring of oracles

    • Switching providers if failures are detected

    • Potential use of redundant on-chain oracles

• Front end

  • The World Markets protocol operates fully onchain. When a user connects to the website, a server sends the user the full front end code required to connect and use the protocol. Like any website, this server can go down. When this happens, the protocol continues to operate without pause, but your "normal" way of accessing the protocol will be interrupted. To prevent this, we recommend having multiple ways to use the protocol, including saving multiple front end providers or using programmatic access. Potentially, the most reliable way to access the protocol is to download the front end code and run it locally on your computer, this gives you the same UI, without relying on any 3rd party to use the protocol.

Operational Risks

DEXs require strong administration and monitoring to remain reliable:

• World depends on the administrator's understanding of markets, token risk profiles, and threat monitoring.

• This is currently a central point of failure.

• In theory, these responsibilities could be decentralized in the future — World is still exploring such possibilities for the long term.

• The administrator does not ever have the ability to control users funds. The administrator does not operate the market, matching, or trading.

• The administrator can:

  • List new assets for trading spot, perpetual futures, and lending.

  • Trigger circuit breakers and pause trading in specific markets.

  • Set maker and taker fees per account.

  • Turn off the exchange permanently. This function may be deleted in the future.

  • Upgrade the smart contracts ONLY during Beta, primarily for security reasons.

Regulatory Uncertainty

Regulation poses one of the largest risks to decentralized exchanges:

• Challenges

  • DEXs are permissionless and borderless, making them harder to regulate.

  • Lack of intermediaries complicates KYC/AML enforcement.

• Global landscape

  • Legal uncertainty could affect user accessibility and the long-term viability of certain DEX models.

• World's restricts UI access to non-US IP addresses

Liquidity Challenges

Liquidity is a fundamental challenge for all DEXs, especially compared to centralized exchanges:

• Low on-chain liquidity

  • On-chain order books can suffer from low depth and high slippage, particularly for less popular tokens.

  • Fragmentation across multiple blockchains limits deep liquidity on any one platform.

• Interoperability hurdles

  • Assets are often siloed in different ecosystems.

  • Cross-chain liquidity remains limited despite emerging bridges and aggregation protocols.

• World's approach

  • Active liquidity providers, some of whom may be market makers, as a core user group:

    • Technical: transactional bundles (including fused cancel-rebook instructions) lower gas costs

    • Financial: low or zero fees for market makers

    • Maximal capital efficiency features maximizes profitability across the venue.

Leverage

Read Risk Parameters & Stats to understand how much leverage traders can take on WCM.