Network Congestion Risks

Network congestion risks arise when the volume of transactions on a blockchain exceeds its capacity, leading to delays and spikes in transaction costs. For financial derivatives, this can be catastrophic, as it may prevent users from adding margin or closing positions during volatile market moves.

This creates a systemic risk where users are unable to respond to price changes, potentially leading to forced liquidations. Protocols must design mechanisms to handle these spikes, such as off-chain scaling or fee markets.

Understanding these risks is essential for participants to assess the reliability of a platform under stress. It is a core concern for the scalability of decentralized finance.