Risk Assessment¶

Sera Protocol is committed to transparency. This page outlines known risks associated with using the protocol. Users should understand these risks before participating.

Smart Contract Risk¶

Description¶

All on-chain protocols are subject to smart contract vulnerabilities. Bugs in the code could lead to loss of funds.

Mitigations¶

• Professional security audits (pending)
• Extensive internal testing
• Testnet deployment with community testing
• Bug bounty program (planned)

Oracle Risk¶

Description¶

The FCICAMM relies on external price oracles to determine swap rates. Oracle failures or manipulation could result in:

• Stale Prices: Trades execute at outdated rates
• Price Manipulation: Attackers exploit oracle lag for arbitrage
• Oracle Downtime: Swaps may fail if oracle is unavailable

Mitigations¶

• Multiple oracle sources with fallback mechanisms
• Price deviation checks and circuit breakers
• Time-weighted average prices (TWAP) as benchmark and enable automatic pause if oracle prices deviates from TWAP by more than a configurable threshold
• Admin ability to pause trading during oracle anomalies
• Automatic pause if oracle prices deviates from each other by more than a configurable threshold

Stablecoin Depeg Risk¶

Description¶

Sera facilitates trading of stablecoins pegged to fiat currencies. If a stablecoin loses its peg:

• V0 (CLOB): Market makers may withdraw liquidity; spreads widen significantly
• V1 (FCICAMM): Oracle may quote stale "pegged" prices while market price diverges, causing LP losses

Historical Examples¶

Mitigations¶

• Curated selection of battle-tested stablecoins
• Only licensed and regulated stablecoins are supported
• We do not support algorithmic or other unbacked stablecoins
• Real-time monitoring for depeg events
• Emergency pause functionality
• V1 oracle design incorporates multiple price feeds

→ View Supported Tokens on Testnet

Counterparty Risk (V0 CLOB)¶

Description¶

The V0 CLOB uses a hybrid model with off-chain order matching. While settlement is fully on-chain and non-custodial, the matching engine is centralized. In the future, we plan to decentralize the matching engine.

What This Means¶

• Your funds are always in your wallet until a trade settles
• The matching engine cannot steal funds
• The matching engine could censor or front-run orders

Mitigations¶

• Settlement requires your EIP-712 signature
• Orders can be cancelled permissionlessly on-chain
• We will launch a decentralized sequencer in the future

Regulatory and Real-World Risks¶

Description¶

Cryptocurrency markets and DeFi protocols operate within a complex global environment subject to geopolitical events, regulatory changes, and macroeconomic factors.

Considerations¶

• Geopolitical Conflict: Wars or conflicts involving major economies could lead to rapid currency devaluation, capital controls, or internet infrastructure disruptions affecting protocol access.
• Currency Attacks: Nation-state actors or large financial entities could attempt to manipulate the value of fiat-pegged stablecoins through speculative attacks or massive sell-offs.
• Regulatory Crackdowns: Jurisdictions may unpredictably ban or restrict FX trading, stablecoin usage, or access to DeFi frontends.
• Market Manipulation: While we mitigate on-chain risks, underlying assets could be subject to manipulation in off-chain markets, affecting oracle prices or stablecoin pegs.

Note: Sera Protocol operates as software. We cannot prevent sovereign nations from enacting policies that affect the value of the currencies traded on the platform.

Summary¶