DEX Vault Risk Incident Triggers Industry Reflection

Recently, a loss event involving the Hyperliquid treasury has drawn widespread attention in the cryptocurrency industry. On March 12, 2025, the treasury suffered losses exceeding $4 million due to a trader's high leverage operation. This incident once again highlights the challenges that decentralized exchanges (DEX) face in terms of security and risk management.

The cause of the incident was a trader who established a large long position in ETH using 50x leverage. As the ETH price fell, approximately 160,000 ETH (worth $306 million) of long positions were forced to liquidate. Due to the large scale of the liquidation, the ETH price further declined during the closing process, ultimately resulting in significant losses for the treasury.

This event has sparked in-depth discussions within the industry regarding the DEX treasury mechanism and risk management. DEX treasuries are typically divided into two types: single-type and composite-type. Single-type treasuries enhance capital efficiency by centrally managing user assets, while composite-type treasuries incorporate various strategy modules, such as market making, order taking, funding rate management, and liquidation.

The design of the composite vault aims to provide comprehensive liquidity support and sources of income for DEX platforms. However, this incident has exposed that under extreme market conditions, such a complex structure may pose additional risks. In particular, the liquidation strategy, when faced with large-scale, highly leveraged positions, may result in severe slippage losses.

To address similar risks, some DEX platforms have begun to adopt stricter risk control measures. For example, a certain trading platform has introduced a dynamic risk control mechanism that dynamically adjusts the maximum leverage ratio and maintenance margin ratio based on user trading volume and market conditions. This approach helps to reduce the overall risk of the platform while maintaining market vitality.

This incident reminds us that while the DEX industry pursues high returns, it cannot overlook the importance of risk management. In the future, DEX platforms need to continue to work hard in the following areas:

1. Strengthen smart contract audits to ensure code security.
2. Optimize risk control strategies, especially for managing large transactions and high-leverage operations.
3. Establish a more flexible and dynamic risk management mechanism to adapt to the rapidly changing market environment.
4. Improve user education and enhance traders' risk awareness.

With the continuous development of the DEX industry, balancing security, user experience, and yield will be key to the platform's success. Only through continuous innovation and improvement can DEX maintain a long-term advantage in the fiercely competitive cryptocurrency market, providing users with a safer and more efficient trading environment.