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Risks

In order to discuss the risks of using Contango it’s worth recapping some key features of the protocol:
  • Contango prices perps via spot and money markets, so it’s reliant on the liquidity of these markets (Uniswap, Aave, etc.). The long-term vision is to aggregate as many markets as possible to offer the best liquidity — read: price — for perps in DeFi.
  • Contango doesn’t have an order book, nor liquidity pools, which means there’s no liquidity held on the protocol (no TVL).
  • Liquidations are not carried out on Contango, but on the underlying money markets.
So, when using Contango, a trader should bear in mind the following risks:
  • Market risk, i.e. sudden movements in price that can result in potential liquidations.
  • Interest rate risk, i.e. sudden movements in the rates that can result in potential liquidations.
  • Multiple smart contract risk, i.e. Contango’s, plus any underlying money market (Aave, etc.). Contango has already been fully audited by ABDK.