Risks

Smart Contract Risk

GammaSwap uses a smart contract that handles deposits, withdrawals and transfers of funds between accounts at settlement.

The smart contract only handles user intent verification and the transfer of funds from one user to another as a result of deposits, withdrawals, trades, and payouts at contract settlement. It does not perform the matching of orders. This vastly reduces the surface area of an exploit.

Regardless, bugs or vulnerabilities in the smart contracts could result in the loss of user funds.

Liquidity Risk

GammaSwap V2 is a new protocol and each epoch the order books have to repopulate. At times, there may be low liquidity especially during odd hours or on the weekends.

Be aware of market slippage which could lead to a bad trading experience or substantial losses. Holding to resolution can help you avoid slippage.

Rollback Risk

GammaSwap maintains state between the order matching engine ledger and the Base blockchain. Transactions are settled onchain as fast as 15 seconds or up to a few minutes depending on Base network congestion. When transactions settle on Base chain, they are considered finalized.

If there is a mismatch in state due to any number of reasons (base chain down, error in matching engine), trades will be rolled back to the last moment where the state was matched correctly. Any transactions past that point will be reverted. Rollbacks should not happen frequently.

Oracle Risk

All markets currently use Pyth as the oracle source. If Pyth is compromised or manipulated, the resolution price could be affected.

Pyth is a battletested, robust service so the probability of this is low. Pyth mitigates manipulations by taking spot bid ask spreads from a list of 120 data publishers, large market making firms and institutions, instead of directly relying on exchange prices.

We implemented a Time Weighted Average Price (TWAP) to make oracle manipulation more difficult and provide a better trading experience.

There may be other risks not outlined here. This is not an exhaustive set of risks.