Risks

Risks & Challenges

A decentralized exchange (DEX) like WCM 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.

  • WCM 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

Operational Risks

DEXs require strong administration and monitoring to remain reliable:

• WCM depends on the operator’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 — WCM is still exploring such possibilities for the long term.

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.

• WCM'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.

• WCM's approach

  • 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.