Risks & Security

Below is a non-exhaustive summary of the principal risks you assume when interacting with the Watt Protocol. Review each item carefully—understanding these factors is essential before wrapping, unwrapping, providing liquidity, or otherwise engaging with Watt assets.

Smart contract risk

The Watt protocol’s smart contracts could, in theory, be exploited, resulting in the theft or permanent freezing of funds. Although this risk is inherent to all smart contracts and can never be entirely eliminated, it can be mitigated. To reduce it, we conducted extensive internal testing and commissioned independent auditors to review all on-chain programs, see Audits. The onchain programs were also deployed to a devnet for rigorous testing before being propagated to mainnet.

Third-party risk

We are dependent on several external services—predominantly the constant-product market-maker (CPMM) liquidity pools on the Raydium DEX. Because Watt’s core functions require Raydium’s CPMM to operate correctly, any vulnerability, outage, or misconfiguration affecting that infrastructure could impair Watt or expose users to loss. For details on Raydium’s security controls, see its protocol documentation: https://docs.raydium.io/raydium/protocol/security.

Volatility insufficiency risk

Returns on Watt assets are driven by market volatility, an inherently unpredictable variable. During extended periods of low or “flat” price action, annual percentage rates (APR) can fluctuate sharply—or decline altogether. We seek to mitigate this exposure by promoting wider adoption of Watt assets throughout the Solana ecosystem, thereby deepening liquidity and diversifying sources of trading volume.

Liquidity and price divergence risk

Users should monitor the depth of liquidity in both the underlying token’s pool and the corresponding Watt asset pool. If either pool is thin, trades may suffer significant slippage, leading to potential losses. Importantly, the ability to redeem Watt assets for the original token remains unaffected by pool depth.

Fee parameter risk

The initial liquidity providers set the fee schedule for each Watt asset. Fees that are too high or too low can erode net returns—both scenarios can suppress yield. Users should therefore always review the current fee configuration before trading or supplying liquidity.

Network liveness risk

Outages or heavy congestions on the Solana mainnet can halt swaps and arbitrage, allowing Watt asset prices to stray materially from their underlying value. Although these dislocations are usually short-lived, users should always confirm the current status of the Solana network before transacting.

Token-2022 extension compatibility risk

Watt protocol relies on the Token-2022 transfer fee extension. Although support for this feature is now common across the Solana ecosystem, certain legacy wallets and applications may still handle transfer-fee tokens incorrectly—or not at all. Before interacting with Watt assets through any third-party service, confirm that it fully supports transfer-fee–enabled tokens.