Risks

Using Domination Finance involves several categories of risk. This page states them directly.

Smart Contract Risk

The protocol consists of 16 smart contracts, 10 of which are upgradeable via TransparentUpgradeableProxy. Smart contracts may contain bugs despite internal review. If a vulnerability is exploited, deposited funds could be lost.

Mitigations:

• Upgradeable contracts allow patching vulnerabilities
• Timelock governance prevents instant unilateral changes
• A formal third-party audit is being pursued (see Audits)

Oracle Risk

Dominance prices are calculated off-chain from exchange feeds and submitted on-chain via ECDSA-signed messages. If the oracle submits an incorrect price, trades could execute at wrong levels, triggering unfair liquidations or mispriced entries.

Mitigations:

• Prices are weighted across 5 exchanges (Binance 3x, Coinbase 2x, Bybit/Gate/MEXC 1x each)
• Anomaly detection rejects ticks diverging >50% from CoinGecko reference
• On-chain ECDSA verification ensures only authorized signers can submit prices
• Delta violation check: if dominance moves >2% between publishes, the previous value is carried forward

Residual risk: The oracle is operated by the DomFi team. If the signing key is compromised or the off-chain infrastructure fails, prices stop updating and pending orders cannot execute.

Liquidation Risk

At 250x leverage, a 0.4% adverse price move triggers liquidation. At 100x, approximately 0.9%. Liquidated traders lose their entire collateral — nothing is returned.

Accrued funding fees shift the effective liquidation price closer to entry over time. A position on the majority OI side can drift toward liquidation purely from funding, without any price movement.

Counterparty Risk (for LPs)

The vault acts as the sole counterparty to all trades. Sustained trader profitability reduces vault value. There is no insurance fund, no auto-deleveraging (ADL), and no socialized loss mechanism. If the vault is depleted:

• Circuit breakers halt payouts (profitable trades temporarily can't close)
• Circuit breakers do not restore lost capital
• There is no external backstop

LP deposits can lose value. The $dfUSDC/USDC rate can fall below 1.0 with no guarantee of recovery.

Governance / Upgrade Risk

Contract upgrades and parameter changes are controlled by a Governor role via timelock. The Governor can:

• Add or modify trading pairs and fee schedules
• Change max open interest limits
• Upgrade contract implementations
• Register new oracle signers

All changes pass through DomfiTimelockOwner, but users should be aware that protocol parameters can change.

Operational Risk

The protocol depends on off-chain infrastructure:

• bot-publisher: Computes and publishes dominance prices. If it goes down, no new prices are published and trades can't execute.
• bot-transactions: Fulfills trade orders and triggers liquidations/TP/SL. If it goes down, pending orders aren't fulfilled and at-risk positions aren't liquidated.

Both bots are operated by the DomFi team. There is no decentralized keeper network.