Strategy 05 · Spot Trading
Decentralized Venues
A venue with no counterparty, and new ways to lose.
Decentralized exchanges settle trades in smart contracts rather than on a company’s books. There is no exchange to fail, no withdrawal to be suspended and no account to be frozen. In exchange, the trader takes on the contract’s code, the chain’s finality, the cost of gas and the attention of participants who can see every pending transaction. Wesvel treats these as venues like any other, with a different risk list.
Automated market makers and order books
Most decentralized spot volume trades against automated market makers, where price is set by a formula over pooled inventory and large trades move it predictably. On-chain order books, running on faster chains or dedicated rollups, behave more like centralized venues. Both are read by the routing system for depth and cost like any other venue, with gas and expected price impact included.
MEV and private relays
A transaction broadcast to a public mempool is visible before it executes, and other participants can trade around it, front-running, sandwiching or back-running it for profit at the sender’s expense. Wesvel routes on-chain trades through private transaction relays where available, so the order is not visible until it is included, and sets slippage tolerances tightly so a trade that would be exploited fails instead.
Finality and settlement
An on-chain trade is settled when the chain considers it final, which varies from seconds to many minutes depending on the network. Until then it can in principle be reversed. Cross-chain moves add bridge risk on top. The strategy treats a trade as settled only at finality, and sizes exposure to any bridge as a counterparty limit.
Contract risk
Every pool, router and aggregator the strategy touches is code that can be exploited. Only venues that have passed protocol diligence are used; approvals granted to contracts are limited in scope and revoked when not needed; and the wallet that trades holds only working inventory.
Practice
How Wesvel approaches it
- 01On-chain trades are routed through private relays where available, with slippage tolerances that fail a trade rather than let it be exploited.
- 02Only venues, routers and aggregators that have passed protocol diligence are used, and token approvals are scoped and revoked.
- 03A trade is treated as settled at chain finality, not at inclusion; bridge exposure is sized as a counterparty limit.
- 04Trading wallets hold working inventory only; everything else is in segregated custody.
More in Spot Trading
- Cross-Venue ArbitrageBuying and selling the same asset on two venues at once, and why pre-positioned inventory is what makes it work.
- Smart Order RoutingSplitting large orders across venues and time against live depth, and reviewing every execution against arrival price.
- OTC Block ExecutionExecuting large trades bilaterally with principal liquidity providers, and settling without leaving assets at the desk.
- Inventory and SettlementManaging working balances across venues, sweeping to custody, and settling fiat and stablecoin legs through regulated partners.