How Does the Risk of Smart Contract Exploits Affect Trading on DeFi Option Protocols?
The risk of smart contract exploits is a major systemic risk in DeFi. A bug or vulnerability in the protocol's code could lead to the total loss of all funds locked in the contract, including collateral and premiums.
This risk introduces a layer of uncertainty that is not present in traditional options trading, requiring traders to assess the security and audit history of the protocol before participating.
Glossar
Contract Exploits
Vulnerability ⎊ Contract exploits represent critical flaws in smart contract code that allow unauthorized manipulation of assets or logic.
Smart Contract
Code ⎊ The contract is fundamentally self-executing code deployed on a distributed ledger, embodying the terms of the agreement in an immutable format.
Smart Contract Exploits
Vulnerability ⎊ Smart contract exploits represent systemic risks within decentralized finance, arising from flaws in code governing automated agreements.