Risks & Mitigations
Risks that the 0xdx team has outlined with detailed mitigation plans.
As anyone who has participated in Web3 knows, smart contracts are subject to several types of bugs and exploits. Many NFT collections, bridges, and dApps have been exploited from one or more small bugs in the code.
Many platforms skip the auditing process entirely, exposing their project to a higher risk of exploit. This is why 0xdx will be getting all of our smart contracts associated with functionality of the platform (payout, oracles, etc) audited to dramatically reduce the risk of exploit.
Price manipulation is a risk that 0xdx takes seriously. Price manipulation can occur when bad actors want to put undue influence on the price by performing a trade that is significantly outside of the normal range (an outlier trade).
To mitigate price manipulation, the 0xdx team has chosen to use a moving average with outlier detection to settle contracts. The critical decision to use a moving average instead of using floor price or average sale price is to mitigate price manipulation and smooth out dramatic swings to best represent changes in the price of the underlying collection.
Other NFT derivatives platforms leverage off-chain data from secondary marketplaces - WE DO NOT. Relying on other dApp's/platform's data is very risky as their APIs are subject to changes, updates, and downtime.
We rely on our own Layer-2 oracle for collection prices. For the remainder of the data, we utilize on-chain transaction data. By importing data directly from on-chain sources, a higher uptime with increased reliability can be maintained.
Many platforms suffer from a lack of liquidity, especially on futures platforms that are doing everything they can to match buyer positions with seller positions. Additionally, several NFT derivatives platforms use different forms of liquidity pools which are risky and unsustainable over long periods of time.
Liquidity is a non-issue within 0xdx. We have incorporated gamification and rewards within the platform to incentivize people to sell and buy options contracts on 0xdx. Additionally, the 0xdx team is looking to work with quality market makers that can offer a wide range of options allowing for greater liquidity and selection.