Risks

Smart contract risk

Vest’s protocol relies on smart contracts deployed on Base (an Ethereum Layer 2) to manage settlement, margin, and system state. Bugs or vulnerabilities in these contracts—such as flaws in fund transfer logic or zkProof verification—could lead to the loss of user funds. While smart contract audits and formal verification help reduce risk, the possibility of unforeseen exploits cannot be fully eliminated.

L1 / L2 risk

Vest’s treasury contracts are deployed on Base, an Ethereum Layer 2. If Base’s bridge or infrastructure is compromised, users could face loss of funds or disruption of trading and withdrawals. These risks are inherent to all L2 systems and extend beyond Ethereum’s L1 security guarantees.

Market liquidity risk

At the early stages of a protocol, low liquidity is a potential risk that can lead to price slippage. Vest’s zkRisk enables a higher degree of capital efficiency and order book liquidity compared to other exchanges, but very large positions relative to order book depth may still result in slippage.

Oracle manipulation risk

Vest sources mark prices from a depth-weighted median of major centralized exchanges, including Binance, OKX, and Bybit. If one or more of these venues reports inaccurate data—or if a coordinated manipulation occurs, as seen in the Mango Markets attack—the oracle price may be distorted. While Vest implements guardrails to mitigate this risk, such as using multiple sources and depth weighting, manipulation remains a potential vector for premature liquidations or mispriced funding.

Risk mitigation

Vest manages risk through zkRisk, which dynamically adjusts funding and premia based on each trade’s marginal risk. This prevents excessive exposure in real time. Additional safeguards—like open interest caps—limit position sizes in volatile or illiquid markets, reducing the risk of liquidation cascades and preserving system solvency.