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What Is the Primary Risk of a Fully On-Chain Derivatives Protocol?

The primary risk is high vulnerability to MEV and front-running attacks due to the public visibility of all transactions in the mempool.
Greeks.Live13.11.25

What Is the Primary Risk of a Fully On-Chain Derivatives Protocol?

The primary risk of a fully on-chain derivatives protocol is its vulnerability to Maximal Extractable Value (MEV) and front-running attacks. Since all transactions ▴ order submission, collateral management, liquidation, and settlement ▴ are visible in the public mempool, they are susceptible to being exploited by searchers and block builders.

This vulnerability can lead to poor execution prices, increased trading costs, and a loss of funds for users, particularly during liquidations or large settlement events. High gas costs and slow transaction finality are also significant risks.

How Does ‘Maximum Extractable Value’ (MEV) Relate to Front-Running in Decentralized Finance (DeFi)?
What Is the Primary Difference between Traditional Market Front-Running and ‘Sandwich Attacks’ in DeFi?
What Is Maximal Extractable Value (MEV) and Its Relation to Front-Running?
How Does the Transparency of a Public Order Book on a DEX Enable Front-Running?

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