After joining the Arbitrum Open House Buildathon, competing with 278 projects, Denaria won 3rd place and secured its spot at the IRL Founder House in London.

This milestone marks an important step in our journey: from our first deployment on Linea, to expanding into the Arbitrum ecosystem, to deploying a Stylus-powered version of Denaria on Arbitrum testnet.

Denaria

@DenariaFinance

Introducing the New Arbitrum Testnet Competition

We are launching a new trading competition on the PWA to test the just released @arbitrum testnet version of Denaria, powered by Stylus.

Here, you can try the new experimental version of the PWA, built for the Arbitrum Open House

16

12:27 PM • Jun 19, 2026

Why We Joined the Arbitrum Buildathon

Denaria is building a fully onchain perpetual DEX with a mobile first approach, powered by the dynAMM: a dynamic virtual AMM designed to make perp trading more transparent, efficient and composable.

After our first deployment on Linea, we started exploring Arbitrum as the next environment for Denaria’s evolution. The reason was simple: Arbitrum offered a strong ecosystem for DeFi builders, and Stylus opened a new path to optimize gas intensive operations like the ones of the Denaria protocol.

Every trade, every liquidation, every funding payment and every liquidity update needs to happen onchain.

This creates a clear challenge: how do you keep the protocol fully transparent and trustless without making the trading experience too expensive for users?

Stylus gave us a concrete way to test that question.

Bringing Denaria to Arbitrum Testnet

During the buildathon, the team focused on integrating Stylus into Denaria’s technical stack, starting from one of the most important parts of the protocol: the trading engine.

More specifically, we worked on moving part of the curve logic into Rust through Stylus, with the goal of reducing execution costs while preserving the architecture of Denaria’s fully onchain perpetual system.

The first results were promising:

• 12.2% lower execution costs for long trades.

• 13.4% lower execution costs for short trades.

This was an important validation for us.

The goal has always been to keep the core protocol onchain, transparent and verifiable. The Stylus implementation showed that we can continue in this direction while making the system more efficient for traders.

Alongside the technical work, we also deployed the Stylus-powered version of Denaria on Arbitrum testnet, allowing users to interact with the new implementation and helping us collect valuable feedback and data.

Denaria

@DenariaFinance

x.com/i/article/2067…

34

3:28 PM • Jun 17, 2026

Road to London

Winning 3rd place in the Arbitrum Open House Buildathon is a strong recognition of the work the team has been doing over the past months.

Arbitrum

@arbitrum

First up: the Open Category, with $70K in prizes.

These teams built innovative products across trading, RWAs, and market infrastructure.

Huge congratulations to:
1st Place ($40k): @TradeVerus - Gasless perp aggregator that routes trades to the best-priced venue.
2nd Place

35

5:40 PM • Jun 22, 2026

It confirms that Denaria is building in the right direction: a fully onchain perpetual DEX, with a mobile-first approach, built for transparency, performance and simple access to perp markets.

But this is not the end of the journey. It is the next step. The next chapter is the IRL Founder House in London.

Arbitrum

@arbitrum

x.com/i/article/2062…

117

3:32 PM • Jun 4, 2026

There, Denaria will keep building alongside other selected teams, receive direct feedback from the Arbitrum ecosystem, and further validate its go-to-market direction: bringing perp trading to mobile users through a simple, instant and accessible trading experience.

From Linea, to Arbitrum testnet, to Stylus, to London.

Denaria: trade, easily, everywhere.

For users, this means trading in a fully permissionless and transparent environment. However, it also means that everything is executed onchain, which can make gas fees quite high.

As part of its development on the Arbitrum network, Denaria has started implementing Arbitrum Stylus inside its trading engine to make execution more efficient and cheaper for users.

Denaria’s Journey Through the Arbitrum Buildathon and Open House

Denaria started its journey on the Arbitrum network a few weeks ago by participating in the Open House Buildathon program.

This program aims to support builders in the process of creating and developing crypto projects within the Arbitrum ecosystem.

Arbitrum

@arbitrum

Open House London remote 3-week Buildathon program kicks off May 25th with $115K in prizes.

If you're an early-stage team looking to bring new product ideas into the programmable economy on the Arbitrum Platform, here’s why you should register.

openhouse.arbitrum.io/?utm_source=tw…

169

3:48 PM • May 15, 2026

Denaria had the opportunity to establish a direct communication channel with the Arbitrum and ArbitrumDev teams about product development and growth strategies.

In this buildathon, Denaria focused on one key question: Can Stylus make Denaria’s trading engine more gas-efficient?

The first area tested was CurveMath, one of the math components used inside Denaria’s PerpPair engine.

This was a natural starting point because Denaria’s architecture depends heavily on mathematical operations for trading, funding, liquidity, and liquidations.

What Is Arbitrum Stylus?

Arbitrum Stylus allows developers to write smart contracts in languages like Rust, C, and C++, while staying compatible with the EVM.

Instead of running everything only through Solidity, Stylus lets selected parts of a protocol run in a WASM environment.

For Denaria, this opens the door to a more efficient trading engine, especially for logic that requires repeated calculations.

Denaria’s core trading module is called PerpPair and this specific module handles:

• opening and closing positions;

• funding logic;

• liquidation logic;

• liquidity management;

• interactions with the vault and oracle system.

Because all of this happens onchain, execution efficiency is critical.

Lower gas costs can improve the experience for traders, LPs, and keepers, while making Denaria more scalable as protocol activity grows.

In general, the upcoming migration from Linea to Arbitrum will improve trading efficiency, as Arbitrum is, by far, cheaper than Linea.

The First Implementation: CurveMath in Stylus

Denaria completed its first implementation by migrating CurveMath to Stylus.

The result was clear: migrating CurveMath alone was not enough.

In terms of ETH gas units, Stylus v1 was more expensive than the Solidity baseline.

This happened because the architecture required too many transitions between Solidity and Stylus. The potential performance gains were offset by the cost of moving between the EVM and WASM environments.

The lesson was important: Stylus does not automatically reduce gas costs. It has to be integrated into the right part of the architecture.

Second Implementation: Optimization of CurveMath in Stylus

After the first benchmark, the team moved to a second implementation.

The focus shifted from simply migrating one library to reducing unnecessary EVM-to-WASM transitions. As a result, the second CurveMath version improved slightly:

This confirmed that the right path was not isolated library migration.

To get meaningful improvements, Stylus needs to be integrated deeper into the trading engine.

Preliminary Results: Converting PerpPair into the Stylus PerpEngine

The next benchmark tested a broader hybrid implementation, where the PerpPair smart contract and its dependencies have been converted to Stylus and are now part of the PerpEngine component, and the Vault, TWAP Oracle Middleware and their dependencies remained unchanged in Solidity.

This setup guarantees a good level of flexibility while offering meaningful gas cost improvements.

Here, the results were more promising:

• 12.2% lower execution costs for long trades

• 13.4% lower execution costs for short trades

These are still preliminary results, but they confirm the direction Denaria is exploring.

The strongest gains come from making the trading engine Stylus-aware, not from moving single functions in isolation.

What’s Next

Denaria’s Stylus work is not a simple migration exercise.

It is an R&D process focused on understanding where Stylus creates real performance gains and how it can be integrated safely into a fully onchain trading protocol.

The early benchmarks have already provided a key lesson: the strongest improvements come from redesigning the trading engine around Stylus, not from moving isolated functions one by one.

That is the direction Denaria is now exploring with the Stylus-based PerpEngine.

The goal is clear: build a more efficient, scalable, and production-ready trading architecture on Arbitrum, while preserving the security and verifiability required for a fully onchain perpetuals protocol.

Denaria Rises!

The first article focused on the April 5 incident, where Denaria’s Mainnet Beta was exploited through a smart contract accounting flaw in the liquidity system.

We explained how the exploit worked at a high level, how the smart contracts are being patched, and why Denaria is introducing additional defensive mechanisms.

Denaria

@DenariaFinance

x.com/i/article/2051…

13

3:11 PM • May 5, 2026

The second article focused on Denaria’s internal security R&D process, especially how the team is using AI tools and invariant testing to improve smart contract reviews.

Denaria

@DenariaFinance

x.com/i/article/2056…

20

3:38 PM • May 19, 2026

This third article focuses on one of the findings that emerged from that internal R&D process.

During the AI-assisted internal security review, the team identified a mathematical approximation in the codebase that could degrade some of the protocol’s internal calculation matrices.

At a high level, this was related to how some accounting calculations were represented and updated inside the system.

This finding is now being addressed through a refactoring of the codebase, with the goal of reducing or removing the impact of these approximation effects and making the accounting logic more stable.

From AI Internal Checks to Findings

Denaria is a fully onchain perpetual DEX. This means that trading logic, liquidity accounting, collateral flows, PnL realization, vault balances, and risk controls all interact directly onchain.

Because of this complexity, security reviews cannot focus only on isolated functions. They also need to analyze how different parts of the system interact together.

This is where AI-assisted internal checks become useful.

AI tools like the ones used by the team can help reason through mathematical assumptions, identify edge cases, generate review paths, and spot parts of the codebase where precision issues may create unwanted effects.

During this process, the team identified an approximation issue in the matrix-based accounting logic.

In simple terms, Denaria uses internal calculation matrices to represent and update liquidity balances inside the protocol.

Over time, and after many operations, some approximation effects could reduce the precision of these matrices.

This does not mean that the protocol was affected by the same issue explained in the first article.

The April 5 exploit was related to a specific accounting flaw involving rounding, an unsafe cast, and LP balance handling.

This finding is different. It is part of the broader security work Denaria is doing to improve the precision, stability, and defensiveness of the codebase before relaunching.

Fixing the Codebase

The current work is focused on refactoring the affected parts of the codebase.

The goal is to reduce or remove the impact of this mathematical approximation and prevent calculation matrix degradation from affecting the accounting logic.

At a high level, the problem is not that the final balances should become impossible to represent.

The issue is more about how some intermediate calculations are executed.

Some values used during the accounting process are not the final balances themselves. They are intermediate mathematical steps used to compute the final result.

For this reason, the team is improving the way these operations are performed.

Instead of dividing too early during the calculation process, the updated approach aims to execute more of the operations first and apply the division later.

This can improve precision and reduce the impact of approximation effects.

In simple terms, some specific parts of the accounting logic of the protocol are being refactored to make the calculation path cleaner and more stable.

The team is also evaluating additional safeguards for cases where these internal calculations become less stable after many trades.

One possible direction is to introduce additional snapshots when specific internal values move beyond a certain threshold.

The goal is not only to fix one isolated issue.

The goal is to make the codebase more defensive around precision loss, mathematical assumptions, and unexpected accounting states.

What’s Next for Denaria

This improvement is part of Denaria’s broader security rebuild.

The team is continuing to work on:

• smart contract patches

• accounting improvements

• matrix calculation refactoring

• invariant testing

• AI-assisted internal reviews

• circuit breakers

• external security reviews

The next step is formal verification.

Invariant testing helps identify the rules that should always remain true inside the protocol.

Formal verification goes one step further by trying to mathematically prove that critical properties always hold.

This will be covered in the next article.

For now, the focus remains the same: bringing Denaria back with a stronger, more defensive, and more mature security architecture.

This second article focuses on another part of Denaria’s security rebuild: how the team is using AI tools to improve internal smart contract reviews.

Denaria (mainnet arc)

@DenariaFinance

x.com/i/article/2051…

11

3:11 PM • May 5, 2026

AI is becoming a double-edged sword for crypto security.

• On one side, advanced models can help attackers analyze public codebases, identify weak assumptions, and automate parts of the vulnerability research process.

• But on the other side, AI can also make security teams stronger. LLMs can help review code, reason through edge cases, generate tests, and identify possible vulnerabilities before they reach production.

Denaria is not a simple DeFi application. It is a fully onchain perpetual DEX, where trading logic, liquidity accounting, collateral flows, and risk controls all interact directly onchain.

That complexity requires a deeper security process.

The transparency and onchain advantage

Denaria’s smart contracts are fully onchain. This means that anyone can inspect the logic, verify how the system works, and analyze the contracts directly.

This transparency is one of the biggest advantages of building onchain, but again, this is a double-edged sword for security.

• Good actors or whitehat can review the code, reproduce edge cases, and help identify improvements faster and with AI tools, this becomes even more powerful. Since the contracts and protocol logic are public, LLMs can be used to analyze the system, reason through possible failure states, and generate additional review paths.

• At the same time, bad actors or hackers can study the same code and look for weaknesses, making the overall protocol at risk.

In the AI era, where both whitehats and attackers have access to increasingly powerful tools for smart contract analysis, full transparency can amplify both sides: faster security improvements, but also faster vulnerability discovery.

How Denaria uses AI for security and invariant testing

Today, security teams can use increasingly powerful models, or general-purpose models enhanced with more vertical context around smart contract vulnerabilities, known exploit patterns, and possible attack vectors.

This matters because some bugs or inefficiencies are extremely hard to identify through manual review alone.

In complex onchain systems, vulnerabilities can emerge from subtle interactions between accounting logic, liquidity flows, user balances, price updates, and edge-case state transitions.

For this reason, using AI as part of the internal security process has become more important than ever.

The goal is not to blindly trust AI or replace human auditors. The goal is to use AI to expand the internal security workflow.

The process Denaria is using starts by giving the models deep context about the protocol. This context matters because Denaria’s risk does not come only from isolated functions. It comes from how different parts of the system interact together.

This is where invariant testing becomes important.

An invariant is a rule of the system that must always remain true, even when the system changes.

In other words, invariants are conditions that should never be violated during the protocol’s execution.

For Denaria, this means identifying the core rules that must always hold across trading, liquidity changes, collateral movements, PnL realization, and vault accounting.

For example: “The sum of all user collateral claims should never be greater than the collateral actually held by the system.”

Once these invariants are mapped, AI tools can help generate tests around them. The models are used to reason through possible edge cases, write test scenarios, and stress the protocol under different conditions.

These tests can include normal user behavior, but also more adversarial scenarios, such as one-sided liquidity actions, rounding edge cases, abnormal balances, repeated interactions, and multiple actors operating in the same transaction.

The goal is to check whether the protocol can enter a state where one of these rules is violated.

If an invariant breaks, that becomes a signal that a specific part of the logic needs to be reviewed, patched, or redesigned.

AI helps generate more review paths and test cases, but the human engineering team checks the outputs, verifies the results, and decides what needs to be changed.

This invariant work also introduces the next step of Denaria’s security research: formal verification.

Formal verification uses invariants to create mathematical proofs around critical parts of the protocol logic. Instead of only testing many scenarios, formal verification aims to prove that certain rules always hold.

This will be covered in more detail in the next articles.

Conclusion

This process is part of Denaria’s broader security rebuild.

AI helps the team review more paths, map invariants, generate tests, and identify edge cases earlier.

At the same time, others security tools now combine AI-assisted analysis with review from independent security teams, adding another layer of validation around the findings and potential bugs and inefficiencies discovered during the process.

This is important because AI alone is not enough. The value comes from combining AI-generated review paths with human verification, engineering judgment, and external security expertise.

The goal, right now, is to bring Denaria back with a stronger, more defensive, and more mature security architecture.

At a high level, the exploit was made possible by the combination of two issues:

• a rounding asymmetry in the matrix-based accounting system

• an unsafe cast from int256 to uint256 without validation

The rounding issue caused one LP balance component to become slightly negative, even though it should have been zero or very close to zero.

The second issue made this worse: when that small negative value was cast into an unsigned integer, Solidity did not revert. Instead, the value wrapped into a very large positive number.

A safeguard then capped this value to the total pool liquidity. But instead of stopping the issue, this effectively credited the attacker’s LP position with almost the entire asset side of the pool.

The attacker used an Aave flash loan, deployed multiple helper contracts acting as LPs and traders, and executed two identical exploit rounds in a single transaction.

Each round followed the same sequence:

• provide one-sided liquidity as an LP

• execute a trade

• withdraw profit through realizePnL

As a result, the attacker was able to generate inflated PnL, convert it into USDC collateral, and withdraw approximately $165k from the vault.

Denaria (mainnet arc)

@DenariaFinance

x.com/i/article/2042…

30

1:05 PM • Apr 10, 2026

How the smart contracts are being fixed

In simple terms, the bug came from a case where one component of the accounting matrix could become slightly negative because of rounding and precision effects.

That negative value should never have been treated as a valid balance.

The fix is straightforward: if the matrix calculation returns a negative value, the protocol now forces it to zero.

This prevents a small negative value from being cast into a huge positive number and then capped into a claim over the full pool liquidity.

So instead of allowing: slightly negative value → huge unsigned value → full-pool liquidity claim

the updated logic forces: negative value → zero

This directly removes the exploit path.

The broader design improvement is that Denaria’s contracts are becoming more defensive around edge cases. Instead of assuming some values “should not happen”, the protocol now explicitly handles them.

Extra layer of security: circuit breakers

Beyond the smart contract patch, Denaria is also introducing an additional layer of security: circuit breakers.

Circuit breakers are safety mechanisms that limit specific protocol actions when abnormal conditions are detected.

For example, they can help protect the protocol if:

• liquidity changes too aggressively

• accounting invariants are violated

• vault balances move outside expected ranges

• abnormal trading behavior appears

• the system enters a state that requires review

The goal is simple: if something abnormal happens, the protocol should be able to limit the operations before the damage spreads.

Circuit breakers add a new layer between “something went wrong” and “funds are lost.”

Of course, this introduces a tradeoff.

Circuit breakers improve safety, but depending on how they are implemented, they can also introduce more control points into the protocol.

That is why Denaria’s approach should be progressive.

As suggested by the smart contract auditors, circuit breakers help protect users while the protocol matures.

Thanks to the team’s ongoing security R&D work, which will be explained in more detail in upcoming articles, these mechanisms can progressively become more transparent, more automated, and more decentralized over time.

Security comes first. Progressive decentralization comes after.

Conclusion

Denaria is an ultra-complex smart contract project.

Building a fully onchain perpetual DEX means that trading logic, liquidity accounting, position management, and risk controls all live directly onchain.

That is powerful, but it also creates deep technical complexity.

This complexity comes from the same thing that makes Denaria innovative and so different compared with other perps: decentralization.

The goal is not just to patch the contracts and relaunch quickly.

The goal is to bring Denaria back with a stronger, safer, and more mature security architecture.

This requires a period of maturation.

The current work includes:

• smart contract patches

• stricter accounting validation

• additional bug fixes

• circuit breakers

• deeper security reviews

• new research and tooling

Denaria (mainnet arc)

@DenariaFinance

Denaria Update — Current State of the Work

A lot is happening behind the scenes as we move through the security rebuild phase.

On the technical side:
• The smart contract fix for the vulnerability behind the exploit is almost complete.
• New security processes are being

15

3:32 PM • Apr 28, 2026

At the time of writing, trading is still unavailable on both the Denaria PWA and the desktop version.

Our mission now is to bring Denaria back online as quickly as possible, but in a way that is fully secure, reliable, and sustainable.

To do that, we have identified the key steps required for recovery, and we are sharing them publicly with the community through this roadmap.

While we are not attaching precise dates yet, we will continue to keep the community updated on the progress of each step.

Denaria’s recovery plan has 3 steps.

Denaria (mainnet arc)

@DenariaFinance

What’s Next for Denaria — Update After the Recent Exploit

Our mission is to bring Denaria back online as fast as possible, in a secure and fully reliable way.

To do so, we are preparing a roadmap covering all the tasks and processes that need to be completed before the Denaria

17

9:36 AM • Apr 16, 2026

1. User Protection After the Exploit — Already Completed

The first step focused entirely on protecting users after the exploit.

Specifically, we have already completed the following actions:

• We disabled trading on the front end, while keeping withdrawals available through the Portfolio section.

• We coordinated with infrastructure partners to reduce further risk.

• We fully refunded traders who had open positions, through the DeFi Foundation.

• We published a technical post-mortem and initiated legal action after the attacker rejected the white-hat bounty route.

Denaria (mainnet arc)

@DenariaFinance

x.com/i/article/2042…

29

1:05 PM • Apr 10, 2026

2. Security Rebuild — In Progress

Before any new liquidity can be deployed, the smart contracts must be fixed, tested, and audited to the highest possible standard.

The main steps here are:

• Contract Patch: rewriting the code to fix the issues that led to the exploit.

• Testing & Documentation Updates: writing new tests, updating the simulator, and updating the whitepaper.

• Chainlink Report Timeframe Review: reviewing and refining the Chainlink report timeframe as part of the protocol’s security architecture.

• Advanced Invariant Mapping: using advanced AI models with maximum reasoning to map every possible edge case and mathematical invariant.

• Assertion Deployment: deploying new assertions to strengthen protocol safety.

• Circuit Breakers & Emergency Safeguards: Implementing an advanced fail-safe layer designed to proactively isolate the protocol and protect user liquidity in the event of extreme market anomalies or abnormal onchain activity.

• New Audit: auditing the upgraded version of the protocol.

As of today, most of this work is already at an advanced stage, particularly the smart contract patching and invariant mapping.

More updates will be shared in the News topic in the official Telegram group and on X.

3. Mainnet Relaunch — After Audits

Once the smart contract security work is completed and validated through audits, Denaria will be relaunched.

This will include redeploying Denaria, restoring liquidity in the vault, and re-enabling trading activity.

Our current plan is the following:

• Relaunch gradually, with TVL caps and no access for users to the LP from the UI.

• Start the relaunch with only the BTC/USD market.

• Introduce ETH/USD only after an initial period of stabilization for the protocol.

What to Expect in the Next Few Weeks

We are already in step 2, and work on the smart contract fixes is actively underway. At the same time, we are evaluating the best structure and partners for the new audit process.

This will remain our main focus over the coming weeks, and we will keep the community updated on progress week by week.

For more detailed and continuous updates, we recommend joining our Telegram community, where the team shares news and ongoing developments.

We are grateful for all the support we have received after the exploit, and we are working hard to bring Denaria back online.

The security process implemented by the Denaria team consisted of two external audit cycles, each preceded by an internal audit. Both external audits were carried out in collaboration with the Consensys Diligence team.

The final external audit resulted in the following report produced by the auditors on September 26, 2025:

https://diligence.security/audits/2025/09/denaria-2/

Following the auditors’ recommendations, the team continued working on:

• adversarial testing

• rigorous invariant checks

• codebase simplification

• internal audits

• additional security measures (Phylax assertion)

The protocol was deployed on mainnet on December 15th for internal testing:

https://lineascan.build/address/0xd07822ee341c11a193869034d7e5f583c4a94872#code

Following the completion of the second external audit, during subsequent internal codebase reviews, the team identified an accounting issue related to the accumulator A(t) (as defined in formula (17) of the whitepaper). Due to its strictly increasing nature, this accumulator could eventually lead to an overflow over time. Whitepaper 0.1 reference:

https://docs.denaria.finance/protocol-whitepaper/#LP%20shares

To address this, a refactor was implemented, as reflected in the updated version of the whitepaper. As a result, this refactor was carried out after the completion of the collaboration with the external auditing team. Whitepaper 0.2 reference:

https://github.com/denaria-finance/dynAMM/blob/main/whitepaper.pdf

The new approach shifted from abstract share tracking to direct balance tracking, ensuring that:

• each LP’s balances (vStable and vAsset) remain bounded by total pool balances.

• the overflow risk is naturally constrained.

Following this implementation, the team decided to conduct another internal audit. However, this change introduced a logical flaw, which was later exploited.

This refactor was deployed in a subsequent release on March 3rd:

https://lineascan.build/address/0xb68396dd4230253d27589e2004ac37389836ae17#code

These latest contracts, deployed on Linea mainnet, were the ones targeted in the attack.

Following this deployment, the team also began collaborating with Phylax to introduce transaction-level assertions at the sequencer level. The goal was to proactively block any transaction that violated predefined safety conditions before execution. In production, an assertion was implemented enforcing the following rule (invariant): “Any user cannot cause bad debt to himself as a result of his transaction.”

Unfortunately, this safeguard was not involved to prevent the exploit because no bad debt was generated during the attacker’s operations.

It is important to note that the exploit did not involve any asset price manipulation, or in general any malfunction or misuse of the Chainlink Data Streams service.

Attack Summary

Based on the analysis conducted by the Linea security team and the Consensys Diligence team, the attack resulted in a loss of approximately $165,618 USDC and was executed in a single transaction.

Attack Tx: https://lineascan.build/tx/0xcb0744a0d453e5556f162608fae8275dabd14292bffbfcd8394af4610c606447

How the attack worked

The attacker:

• used a AAVE flash loan as the initial capital

• deployed multiple helper contracts (acting as LPs and traders)

• executed two identical exploit rounds within the same transaction

Each round followed this sequence:

1. Provide one-sided liquidity as an LP (only vUSD)

2. Execute a trade

3. Withdraw profit via realizePnL

Due to a flaw in the accounting logic, the attacker’s LP position was credited with the entire asset side of the pool, allowing them to drain all available liquidity. The parameters of the attack were deliberately chosen to force the system into generating the error.

Root Cause Analysis

The root cause of the exploit lies in the interaction between two issues.

1. The first is a rounding asymmetry in the matrix-based accounting system. During trade execution, numerical precision effects caused one of the computed components of the LP balance to become slightly negative, even though in theory it should have been zero or very close to it. This type of deviation is subtle and emerges from the combination of rounding during updates and truncation during subsequent calculations.

2. The second issue is related to how this value was handled in the code. The negative result was cast directly from a signed integer (int256) to an unsigned integer (uint256) without any validation. In Solidity, this operation does not revert but instead wraps the value to a very large number. This effectively transformed a small negative value into an extremely large positive balance.

A subsequent safeguard in the logic capped balances to the total pool liquidity. However, instead of mitigating the issue, this cap effectively converted the inflated value into a claim over the entire pool. As a result, the attacker’s LP position was credited with almost 100% of the available virtual assets, resulting in an inflated PnL. This PnL was converted to the total amount of USDC collateral in the Vault and withdrawn.

Individually, neither of these issues would have led to a critical failure. The rounding alone would only introduce minor inaccuracies, and the casting issue would not be exploitable without a negative value. It is their combination that made the exploit possible.

The assertion implementation was not involved in this process, as no bad debt was generated during the attacker’s operations.

Fund Movements

The attacker collected the funds into this address on Linea:

https://lineascan.build/address/0x8d6778d7fae00ad2e0bc12194cf03b756fed9db3

These were the subsequent movements:

• Funds were bridged to Ethereum via Across Protocol.

• Assets were converted into ETH in the bridging process

• Funds were transferred to this EOA: https://etherscan.io/address/0xccf16a13b7607489cce35e6c0c0a7225b2dc052d

Response

The team promptly reached out to the attacker through an onchain message, proposing the return of funds within 48 hours in exchange for a 25,600 USDC (15% of total stolen amount) bounty and a commitment not to pursue legal action:

https://etherscan.io/idm?addresses=0x191933dfd97040a305e70fd0409cbb3bd716505f%2c0xccf16a13b7607489cce35e6c0c0a7225b2dc052d&type=1

Following the message, the attacker began interacting with Tornado Cash, splitting the funds across multiple transactions of 10 ETH and 1 ETH. The interaction of these funds with Tornado Cash suggests that the attacker has no intention of returning the funds, and is instead attempting to obfuscate their trail.

At the same time, the team immediately disabled the two user interfaces (mobile and desktop) interacting with the affected contracts, preventing any further user activity and ensuring that no additional funds could be deposited into the exploited system from the official project UIs.

Current Status

At the time of writing, the funds have not been returned and the 48-hour deadline has expired. The team is actively pursuing legal actions to protect the Foundation supporting the project and is continuing its onchain investigation efforts to identify the attacker.

The team refunded all users who had open trading positions and had funds deposited in the vault. Refund details:

https://gov.denaria.finance/t/denaria-exploit-official-update-on-current-status/21

The mobile interface has been re-enabled to allow users to manage the USDC funds deposited in their smart accounts. Trading functionality is currently unavailable.

Next Steps

The team is currently working on designing a comprehensive plan to bring the product back online in a fully fixed and secure state. Further updates and official communications will follow.

At the core is a dynamic virtual AMM (dynAMM) that recalibrates its pricing curve every time a trade is being executed, anchoring to the latest oracle price powered by @chainlink Data Streams.

This hybrid model ensures efficiency for traders and resilience for liquidity providers.

Introduction to Denaria’s Architecture

Denaria’s architecture is based on a stablecoin collateral vault and the dynAMM. Unlike traditional perpetual protocols, Denaria does not rely solely on vAMMs or order books to determine the price.

Instead, the trading engine integrates oracle data into its liquidity curves, aligning trades with the real-world market at all times.

Importance of Chainlink Data Streams in this Architecture

In perpetual protocols, the accuracy of asset pricing is fundamental. If prices deviate too far from reality, LPs face excessive risk, traders are exposed to unfair liquidations, and arbitrage opportunities drain liquidity.

This is where Chainlink Data Streams come into play. It provides secure, tamper-resistant, and real-time price feeds that enables Denaria to:

• Anchor the dynAMM curve around the last oracle price.

• Compute fair liquidation thresholds.

• Ensure fair funding rate calculations by aligning long/short payments with the last oracle price.

Core Components: dynAMM and Chainlink Data Streams

What is dynAMM?

Automated Market Makers revolutionized DeFi starting with Uniswap, which introduced the concept of passive liquidity enabling spot token trading.

Prices in these systems are self-defined within the pool and depend solely on the ratio of assets provided.

Over time, new designs improved efficiency. Uniswap v3 introduced concentrated liquidity, while Curve’s stableswap and cryptoswap models optimized slippage management for stable and correlated assets. These models are battle-tested and remain the backbone of spot markets today.

But why haven’t these models been adopted for perpetual futures?

Because inefficiencies that are tolerable in spot markets are amplified under leverage. In perp trading, arbitrageurs continuously extract value from mispriced pools, draining liquidity providers and making traditional AMMs unsustainable.

This is why Denaria introduces a new concept: the Dynamic Automated Market Maker (dynAMM).

Unlike static AMMs, where the price drifts based on pool balances, dynAMM anchors directly to oracle prices.

The liquidity curve is constructed using this oracle input and is inspired by Curve’s cryptoswap formulation, ensuring optimized slippage control.

Key advantages of dynAMM:

• No dependency on arbitrage: Prices track the oracle directly, so LPs are not forced to bleed value to arbitrageurs.

• Optimized slippage: Curve-inspired mathematics deliver smooth and efficient trading execution, even under high leverage.

• No market makers required: Unlike orderbook-based perps, all trading logic is managed entirely onchain with transparent, rule and math based mechanics.

• Capital efficiency for LPs: Since liquidity isn’t constantly drained by arbitrage, LP returns are maximized.

In short, dynAMM merges the battle-tested innovations of AMMs with a new oracle-anchored design, making it the first AMM model truly sustainable for perpetual futures markets.

How Chainlink Data Streams Powers the dynAMM

The dynAMM continuously queries Chainlink Data Streams to track the current index price of the underlying asset. This price becomes the “center” of the AMM curve.

Traders still face some controlled slippage, necessary to protect the pool, but execution remains consistently close to the real market price.

Why Chainlink Data Streams?

Secure and Reliable Onchain Price Verification

On Denaria, the reliability of the market price is non-negotiable. Every component of the protocol such as the dynAMM recalibration, funding payments, collateral management, and liquidations depends on its integrity.

This is why Chainlink Data Streams is the natural choice. Unlike centralized oracles or single data feeds, Chainlink Data Streams delivers cryptographically verified price data directly onchain.

Each update passes through a decentralized network of node operators and data providers, which aggregate multiple high-quality sources before signing and delivering the final feed.

This architecture ensures:

• Tamper resistance – no single actor can manipulate the reference price.

• Transparency – all oracle updates are published and verifiable onchain, ensuring that any recalibration of the dynAMM curve can be audited by anyone.

• Finality of settlement – since PnL payments, liquidations, and funding transfers depend on oracle values, their correctness is guaranteed by verifiable onchain proofs.

By anchoring Denaria’s dynAMM to onchain verifiable prices, Chainlink Data Streams enables the oracle layer to become highly secure and reliable.

A Revolutionary Perpetual DEX

The Synergy of dynAMM and Chainlink Data Streams

The combination of Denaria’s dynAMM and Chainlink Data Streams creates a perpetual DEX where prices always converge to the real market, liquidity providers are protected from unfair value extraction caused by mispriced vAMM curves, and traders enjoy executions with minimal slippage even in imbalanced pools.

Benefits

This synergy delivers clear advantages. Large orders can be executed with low slippage, while instant listings become possible for any asset that has a Chainlink Data Stream.

Liquidations are fair, as positions are closed only when a trader’s losses exceed their collateral.

Finally, capital efficiency is preserved, since LP funds are not drained by arbitrage against stale or misaligned prices.

Conclusion

Denaria and Chainlink share the same design philosophy: building decentralized, secure, and onchain verifiable infrastructure.

Denaria innovates with its dynAMM, redefining how perpetual DEXs operate, while Chainlink ensures the robustness of the information layer by delivering decentralized, tamper-proof price feeds through Chainlink Data Streams.

Together, these two technologies not only improve the experience for traders and liquidity providers but also contribute to the technological growth of the entire DeFi sector, paving the way toward more resilient, transparent, and accessible derivative markets.

Discover more about us:

• Get the PWA: https://denaria.finance/

• Special invite code with limited uses: 87747027

• Denaria Docs -> https://docs.denaria.finance/

After months of R&D, offchain testing, onchain testnet, and closed mainnet, Denaria Mainnet Beta will go public on March 10 and begin its journey to conquer @LineaBuild.

In today’s article, we are going to share everything you need to know about the “Denaria Mainnet Beta” also known as “Phase 4” in our internal roadmap.

We are also ready to share more information about the new DXP campaign, which comes with this release and will set the stage for future rewards.

Denaria - Perps on Linea

@DenariaFinance

Denaria Updated Roadmap

Phase 1 → Smart contracts deployed & infrastructure live on Linea
Phase 2 → Internal team testing (no DXP distribution)
Phase 3 (in progress) → First product rollout to selected users (no DXP distribution)
Phase 4 → Referrals open, public

66

11:04 AM • Jan 26, 2026

Denaria Mainnet Beta – Everything You Need to Know

Denaria is a perpetual DEX using an innovative trading engine called “dynAMM”, which allows traders to take long and short exposure with leverage of up to 15x.

Denaria Mainnet Beta will be accessible through the smartphone PWA, while the desktop version will be released very soon.

To obtain the PWA on your smartphone, you must visit our website and follow the installation instructions. Once there, the only requirement is to find an invite code from someone who already has access.

Please note that each user can invite only 10 new users, so invite codes will be limited and difficult to find, especially in this initial release period.

Check our posts on X, join our Telegram chat, and ask around. The earlier you get access, the greater your advantage will be in terms of the DXP campaign.

How to Open Your First Trade on Denaria

Assuming you have an invite code, here’s how to open your first trade:

The first step to opening a trade is to deposit trading collateral. Collateral must be $USDC on @LineaBuild, sent to your PWA address. Visit our docs for comprehensive tutorials about how to deposit $USDC, directly from Linea or from other chains.

After that, the process is super easy.

Go to the BTC/USD market (more markets will be added soon), choose the amount of USDC you want to commit, select the trade direction (long or short), and set your preferred leverage.

You will then be asked to sign the transaction using your passkey, and we will handle the rest, including the blockchain fees.

The New DXP Campaign

We believe early users should be rewarded, which is why we are launching a new DXP campaign for this new phase.

Here are the ways you can earn DXP points:

• Share your invite code → This is the easiest way to earn DXP. When a new user creates an account using your code, you receive points. You also earn a portion of the points generated by the users you invite. Since each user only has 10 invites, it is worth sharing them with active traders.

• Trade and generate volume → You earn 0.4 DXP for every $1 of trading volume. The more you trade, the more DXP you earn.

• Complete daily tasks → To complete the daily task, traders must make at least one $500 trade per day. Each completed day increases the amount of DXP you can claim. If you miss a day, your streak resets and you must start again from the beginning.

Please note that this DXP campaign will run for a limited time. More information will be shared soon.

Linea Has Its Own Perpetual DEX

Our mission with Denaria is to become the de facto perpetual DEX on @LineaBuild. We chose this L2 because of its strong alignment with Ethereum values.

Denaria is not another CLOB-powered perpetual DEX. Instead, it embraces a DeFi-first, fully onchain philosophy that perfectly aligns with the ethos of Linea and Ethereum.

The dynAMM has been tested and fine-tuned for months and is designed to deliver low slippage and enable advanced liquidity management strategies that even the most powerful perpetual DEXs struggle to achieve.

We are extremely excited to start this journey alongside the incredible @LineaBuild team and to bring our perpetual DEX to the top of this ecosystem. Denaria Rises.

Alongside sharing this key process in today’s article, we will also dive into what and how the new DXP points campaign will look like now that Denaria operates with real funds on the Linea blockchain.

What we are showing is the result of months of work, and we could not be more excited to share with you what’s next for Denaria.

The First Weeks of Mainnet

Denaria’s smart contracts were deployed a few days before Christmas, which means they have been live and tested for several days now.

During the holiday season, only the internal team was able to operate with them, and everything ran smoothly.

A total of 172 operations were executed in the first weeks. The initial liquidity deployed was around $10k and has since been increased to $50k in the BTC/USD market, with the liquidator that has worked as intended.

This allows us today to open the gates to a broader community of users, for the first time to non-team members.

Introducing Denaria Next Phase

Thanks to this reassuring data, we have decided to move to the next phase for Denaria, which opens the gates to a select group of traders.

The onboarding of these new users will allow us to stress-test the trading engine in a more complex and demanding way, as the number of operations and managed liquidity will be higher.

Traders will be able to trade the BTC/USD market using a maximum leverage of 15x. These users will be the first able to test Denaria on mainnet after the core team and, as a reward, will be the first to have access to referral codes when they are activated in the next phase.

This first group of selected users comes from the testnet. If you’re one of them and have actively used Denaria over the past few months, you may be selected.

If you’re not included this time, don’t worry, access will be gradually expanded to more users over the coming weeks. Keep testing the app in testnet and accumulating DXP points.

What we ask this batch of users is to test everything and report feedback to the core team.

To be clear, we are now entering the “Phase 3” expressed in this roadmap.

Denaria - Perps on Linea

@DenariaFinance

Here is your TL;DR about the latest Denaria article:

After months of testing, 2 internal and 2 external audits, Denaria is entering the final stretch toward a public mainnet launch.

- What has been achieved during testnet:
Global-position accounting, dynAMM optimization,

Denaria - Perps on Linea

@DenariaFinance

x.com/i/article/2000…

34

3:14 PM • Jan 12, 2026

The New DXP Campaign: The Core Mechanism

Alongside this crucial step for Denaria, what we want to highlight here is the new mechanism that will power the mainnet DXP campaign.

While the numbers still have to be determined and the starting day still to be selected, the core mechanism is set, and these are the four actions that will allow you to gain DXP points. 

• Use referrals and invite friends → this is the most straightforward and easy way to accumulate DXP. When a new user, using your referral, creates an account on Denaria, you accumulate points.

• Trade and generate volume → for each dollar of volume, you will be rewarded with DXP points. The mechanism is simple: more volume leads to more DXP.

• Mainnet multiplier  → All your previous DXP accumulated during the demo, testnet and first mainnet phase, will be multiplied based on the mainnet volume that you will be able to achieve in a precise period of time.

• Complete the daily task → traders will be required to complete a minimum trading volume each day to complete the task. If so, users will be able to claim an incremental amount of DXP.
  But pay attention: if users miss one day, they will need to restart the streak from the beginning.

Again, the new DXP campaign is not live yet and will not until the “Mainnet Beta” will be started.

We will publish a dedicated communication about the precise starting date soon.

Denaria Starts Its Journey

For the first time, Denaria will be tested by non-team users, which means we are officially kicking off the mainnet journey.

We could not be more excited about this crucial step.

This is the last phase before the Mainnet Beta, which will be the period when referral links will be activated and everyone will be able to trade on Denaria.

The results coming from the next days of trading will be crucial to understand when the Mainnet Beta will start, and we will share more information here on X.

Denaria is ready to conquer Linea!

In this article, we’ll discuss the next steps that will bring the Denaria perpetual DEX from a testnet on Linea Sepolia to an open public mainnet on Linea L2.

What the Testnet Was Used For

The Denaria public testnet was introduced on March 19, and since then, extensive testing and smart-contract improvements have been carried out.

Below is a summary of the major fixes and upgrades that have been executed since the testnet deployment:

• Transition from single-position to global-position accounting

• Smart-contract Solidity updates

• Continuous parameter optimization for the dynAMM

• Liquidator stack improvements

• Funding-rate core mechanism and parameter tuning

• Introduction of a recovery system for smart accounts

• Ability to move stablecoins in and out

• Two internal audits

• Two external audits

Some Stats About Denaria

The Denaria journey has been long, starting with an offchain demo and continuing through a fully onchain testnet.

Throughout this process, the trading engine has been extensively stress-tested under real market conditions, across thousands of users and trades.

The following stats clearly demonstrate the depth and intensity of this testing, validating both the robustness and reliability of the protocol over time.

Demo stats

• 6,400 traders onboarded, with 4,600 users having completed Proof of Personhood verification.

• $3.5B total trading volume, with $2.1B traded in long positions and $1.4B traded in short positions

• 118,000 total trades

• 85,000 liquidations recorded

Testnet stats

• Cumulative 8,700+ users onboarded, with 5,900+ users completed human verification

• 133,000 trading positions executed

• 11,700 positions liquidated by the liquidator

Denaria Smart Contracts Deployed on Linea - Introducing Mainnet Alpha

A few days ago, a crucial milestone was achieved by our dev team as the smart contracts powering the Denaria trading engine have been deployed on Linea L2.

While they are currently usable only internally for an initial testing period, this step marks an exceptional moment in Denaria’s history and brings us closer to our goal: making Denaria the leading perpetual DEX on @LineaBuild.

We’ve decided to keep this first mainnet version gated, as an internal testing phase with real funds must be completed before opening it to the public.

Don’t worry, you’ll be able to start using Denaria very soon.

Roadmap for the Next Weeks

This is a comprehensive, yet flexible, roadmap for the upcoming weeks:

Phase 1 (current stage) → Smart contract deployment and infrastructure setup, including frontend and liquidity provisioning.

Phase 2 → Start of the “Mainnet Alpha” and deployment of the first liquidity. Usage is internally gated, with real on-chain operations on Linea. There are no DXP rewards in this phase.

Phase 3 → Opening access to a small, selected group of users and initial product distribution. Still, there are no DXP rewards in this phase.

Phase 4 → Introduction of the “Mainnet Beta”. This phase will enable referral links, allowing anyone to invite users, and will start a new DXP campaign on mainnet.

Important Information About Mainnet Alpha

The audit conducted in collaboration with @ConsensysAudits is now available in our documentation. The Mainnet Alpha and Beta processes have been ideated according to auditor feedback.

BTC/USD will be the first tradable market, with leverage up to 15x. More assets will be added in the weeks.

As shared previously, the team has been working on a second front-end that will allow trading on Denaria Desktop. This front-end will be released soon, stay tuned.

The DXP campaign will undergo major changes to better align incentives for users trading with real funds. A dedicated communication will follow to explain the next phase of this important campaign.

A Big Thank You to Our Testnet Users

We want to close this update by sincerely thanking everyone who participated in the Denaria testnet on Linea Sepolia. Your activity and feedback have been invaluable in helping us build a better perpetual DEX.

Now we’re ready to conquer Linea with our dynAMM.

Are you ready?

Denaria Major Testnet Update

A few days ago, we completed a major testnet update that brought several improvements like the updated solidity version and the new global position accounting system.

https://x.com/DenariaFinance/status/1981802220078121152

Testing, Testing, Testing

This month, Denaria accounted for almost 50% of all transactions on the @LineaBuild Sepolia testnet.

https://x.com/DenariaFinance/status/1975194681488323043

Dune Dashboard for $LINEA Token

Denaria is fully committed to the @LineaBuild ecosystem — that’s why we created a TGE Dune dashboard to track everything related to the $LINEA token.

https://x.com/DenariaFinance/status/1978734910819938671

Denaria x Toads Society

NFT collection in collaboration with @Toads_Society 🐸

https://x.com/Toads_Society/status/1973305961050767689

Today, we are announcing a major testnet update that will strengthen the overall technical infrastructure and bring us a step closer to mainnet deployment.

Testnet Stats So Far

As mentioned above, after months of offchain demo testing, on March 19th we deployed the onchain version of the perpetual DEX on the Linea Sepolia testnet. This was a critical milestone, as it allowed us to test our smart contracts in a more realistic environment.

Since its inception, Denaria has onboarded 8,250 users, with 5,700 completing the human verification process and we are very thankful to all of them who have joined us and contributed to improving the smart contracts.

All these traders have actively tested the system, and the testnet stats confirm it clearly. In the last 5 months, cumulative trading volume on the Denaria Testnet reached $3.8 billion, with over 130,000 completed trades.

It’s Time for a New Deployment: What We Are Improving

Thanks to all the tests carried out by the community, we have identified several areas of the technological stack where improvements can be made. In the upcoming update, expected to go live in around one week, we will improve the following aspects of the perpetual DEX:

• Solidity version → Linea is about to release a major update for their Sepolia testnet, upgrading Solidity to version 0.8.25. This allows us to update our own smart contracts accordingly and provide a more stable and faster trading experience.

• Partial liquidations → Liquidations are a key component of the perpetual DEX, ensuring the system remains solvent and fair for all participants. In the upcoming update, we will improve the partial liquidation mechanism, enhancing both stability and execution. This update will also improve the auto-deleveraging feature, as well as the visualization of liquidations in the user interface.

• Funding rate optimizations → In Denaria, the funding rate mechanism balances open interest and keeps trader exposure aligned between long and short positions. In the next release, we will introduce optimized parameters that will result in a more stable funding rate compared to the previous implementations.

• General smart contract improvements and optimizations → All smart contracts have been carefully analyzed for potential optimizations, with the main goal of reducing gas costs.

Other Minor Improvements

Besides the improvements made directly for the app and traders, there are additional minor updates that will be included in the next release:

• Liquidity Provision Frontend → Although still in closed beta, the LP frontend has undergone extensive internal testing. With the upcoming update, we will also resolve all bugs and issues identified during testing.

• Multicall → This feature will Improve the UX for liquidity providers (e.g., adding collateral, changing strategy). A single operation will now handle allowance and asset deployment, preventing stalled transactions from causing UX issues.

What’s Next for Denaria

The entire Denaria team is working hard to reach mainnet deployment as quickly as possible. Meanwhile, an internal audit is ongoing, and once completed, it will allow us to kick off the external audit, expected to start on September 1st.

Please note that this testnet update, like the previous ones in recent months, will result in a reset of the stablecoins held in users’ wallets. However, DXP will not be affected, and every user will continue to hold their DXP even after the update.

Denaria is improving fast and this is a crucial step for bringing us to the mainnet.

These are notable results, especially for a perpetual DEX like Denaria that’s building something truly innovative, but that’s just the beginning!

Before the mainnet deployment, we want to onboard even more users to help us further test the smart contracts and improve the product ahead of the final release.
In this article, we’ll share how we plan to onboard them.

Our Collaboration with Linea

Denaria is fully committed to building on the Linea blockchain and is actively supporting the ecosystem.

All major product releases, like the recent whitepaper pubblication, are also covered by Linea's official X account, helping us reach a broader, DeFi-native user base.

We expect our alignment with Linea to grow even stronger, benefiting from its booming ecosystem, along with upcoming features and news.

Web3 Social Campaigns and Giveaways

In recent weeks, we've launched two major social campaigns on Intract and Galxe.

These campaigns, boosted by USDC rewards for participants, have delivered encouraging results, growing our X community and bringing in new early testers for the perpetual DEX.

We’re planning additional social campaigns in the coming weeks, with bigger rewards and more complex quests to help us onboard the next wave of users before the mainnet launch.

Giveaways have also proven to be an effective way to both reward our existing user base and attract new traders. You can expect more in the coming weeks, with significant rewards.

Finally, the code system, which can be used to reward specific groups of users with extra DXP, has been utilized in recent months during onboarding campaigns. This feature plays a crucial role in the onboarding process, and we will continue leveraging it.

InfoFi Experiments

InfoFi is one of the biggest trends in the current cycle and platforms like Cookie and Kaito are revolutionizing how projects connect with influential users across social platforms and track their most valuable contributors.

We're currently running internal experiments with the Cookie dashboard and expect to launch a test campaign soon. If you're active on X, try creating content that tags the Denaria handle, let’s see if you can top the leaderboard of community voices!

Co-Marketing with Leading Web3 Projects

We’ve integrated several external services to bring our perpetual DEX to life. Components like account abstraction infra, the oracle and the DAO all make use of Web3 third-party tools we’ve adopted.

With each partner, we’re developing co-marketing content to highlight these features and introduce them to a wider audience.

Denaria at Live Events

In the coming weeks, we’ll be attending key events in the crypto ecosystem. Denaria will be present at two major conferences: ETHCC in Cannes and ETHMilan in Milan.

These live events are always great opportunities to meet new people and teams, spread the word about Denaria, and form strategic partnerships.

If you're attending one of these events, please stop by, we’d love to meet you and hear your feedback!

Denaria Is for Traders

After onboarding, our mission is to retain as many of these traders as possible and we're trying to do that in several ways.

First of all, the Denaria Alpha Chat on Telegram allows us to maintain a strong and direct line of communication with our most active and loyal users. So far, 236 traders have been invited to join the channel, which also enables 1:1 conversations with the team. More invites will be sent out in the future.

Stay active, keep stacking DXP points, and you’ll likely receive an invitation to this exclusive chat.

https://x.com/DenariaFinance/status/1912179102527689211/analytics

We're also working hard on improving the product UX, which includes:

• A gasless trading experience

• An easy-to-use interface

• Seamless on-ramp and off-ramp options (coming after the mainnet deploy)

These features are designed to maximize user retention and provide a frictionless experience for all traders.

Ready to join us? Start earning DXP today and join our growing trader community ahead of the mainnet launch.

This is the first of many updates where we’ll bring the community closer to the engineering process powering our perpetual DEX. Here’s a glimpse into what we’re working on right now:

Smart Contract Audits

Security comes first. Always.

In the past month we’ve already completed an initial audit of our core smart contracts in collaboration with a tier one auditing firm and, since then, our dev team has been refining the codebase and implementing significant improvements across the board.

A second round of audits is scheduled for this summer, ensuring every line of code is thoroughly tested before we hit mainnet.

Given the complexity of our dynAMM engine and the novel mechanisms we’re building, this second audit is not just a precaution, it’s essential for delivering a more stable, secure, and resilient codebase.

Liquidator: Permissionless SDK

Liquidations are one of the most sensitive pieces of any perpetual DEX and at Denaria, we’re pushing towards a more distributed and open solution.

We’re currently building a liquidation toolkit that will allow anyone to participate in the liquidation process and earn rewards.

This means no individual actors, no hidden processes, just open infrastructure securing the protocol.

Simulation Campaigns with Python

Before releasing our dynAMM, we need to understand how it performs across all types of market conditions, from highly bullish to consistently bearish.

We’ve kicked off internal simulation campaigns in Python to stress-test the model, tune key parameters (like funding rate, slippage, fees), and optimize the stability of the system.

The goal: make dynAMM as efficient and resilient as possible, delivering optimal trading conditions no matter the market.

Account Abstraction and Recovery System

We’ve partnered with ZeroDev to bring Account Abstraction to Denaria, enabling smart wallets, passkeys, and a seamless trading UX.

But we’re going even further.

We’re building a first-of-its-kind peer-to-peer social recovery system that lets users assign a backup wallet to recover funds in case of lost access. No more seed phrase anxiety. Just smooth, secure DeFi.

Liquidity Providers Front End

Our vision of a fully onchain perpetual DEX includes one key pillar: permissionless liquidity provisioning.

Denaria will allow anyone to deposit liquidity, act as a counterparty to traders, and earn trading fees.

We’re building a powerful, flexible front end for LPs. Here’s an early look at what’s coming:

• Deposit assets in customizable ratios

• Choose leverage on their liquidity positions

• Provide liquidity within specific price ranges

Codebase Upgrades for Linea’s Upcoming Changes

Linea is planning significant upgrades to its chain in the coming months, which will require our smart contracts to be updated to the latest version of Solidity.

This is great news for Denaria as these upgrades will reduce gas costs and improve performance across the blockchain.

We’re aligning with Linea’s roadmap and actively updating all of our smart contracts to benefit from the upcoming updates.

Trading Chart Improvements

A high-quality trading experience starts with a high-quality chart.

For mainnet launch, you can expect a completely upgraded version of the current trading chart: faster, more responsive, and packed with the tools traders need to perform advanced analysis.

This will be a major step up from the current testnet experience and a key piece of our mission to deliver the best possible perp trading interface.

Backoffice for High-Quality Protocol Stats

High-quality data is essential to analyze the health of a protocol and uncover both its strengths and weaknesses.

So far, we’ve developed an internal backoffice that allows us to track every action taking place on the Denaria trading app. This gives us deep visibility into how the system is performing and where improvements can be made.

In the coming months, when the app goes live on mainnet, we plan to release a public version of this dashboard, giving everyone access to key metrics about Denaria. Users will be able to track cumulative trading volume, open interest, number of active users, and much more.

Regulatory Framework and Geoblocking

Developing a perpetual DEX means facing a wide range of regulatory challenges and our team is actively working on delivering a product that fits within global regulatory frameworks.

This also includes implementing a geoblocking system for users located in restricted jurisdictions.

While we’re committed to open finance, we also recognize the need to operate within evolving legal boundaries and we are actively working to ensure our perp can grow and scale.

Oracles Integrations

Decentralized oracles are crucial to Denaria’s perpetual DEX as they provide the external prices so the dynAMM can recalculate the liquidity curve after every trade.

We are finalizing an R&D phase to identify the oracle solution that integrates most effectively with Denaria’s architecture.

At present, Chainlink, already powering price feeds on our Linea Sepolia testnet, stands out as the strongest candidate as it delivers the transparency, reliability, and trustlessness our protocol requires.

Docs and Technical Content

While the product is being developed and tested, we are also focused on producing clear, complete, and in-depth technical content, helping anyone understand the technology behind Denaria.

A few weeks ago, we released the first version of our whitepaper, followed by a more complete and structured version of our testnet docs.

As we approach mainnet, you can expect even more technical resources. We’ll share detailed breakdowns of the architecture, smart contracts, liquidation mechanisms, the dynAMM engine, and the design choices behind each component of the protocol.

Our goal is to make Denaria not just transparent, but also deeply understandable.

Denaria DAO for Decentralized Governance

Last but not least, an onchain perpetual DEX needs a distributed governance and that means a DAO to steer the protocol’s future.

Denaria is exploring Aragon, a leader in DAO infrastructure, to design a governance system that is secure, efficient, and easy to use.

The DAO will empower the community to vote on key decisions such as:

• Protocol upgrades

• Fee parameters

• Listing of new collateral or markets

• Incentive programs and more

Our goal is to build a DAO that actually governs the protocol, aligning incentives between traders, liquidity providers, and long-term supporters.

Governance will go live after mainnet, and we’ll share more on the structure, voting power distribution, and initial proposals soon.

This is just the beginning. Denaria is evolving fast and we’re committed to keeping the community in the loop.

Stay tuned for other updates.

Through this article, you’ll discover the core innovations of Denaria and how it positions itself within the current landscape of perpetual products.This post also marks the release of the first version of the Whitepaper, which includes all the technical details of the protocol.

Perp in Crypto Market

Perpetual Futures are among the most successful products in the crypto space. This is clearly reflected in the trading volumes recorded daily across both centralized and decentralized platforms.

According to data from IntoTheBlock¹, the Perpetuals market has averaged more than  $3 trillion in monthly volume over the past year, often surpassing the spot market².

Roughly 7% of this volume has been captured by decentralized platforms, and notably  again based on IntoTheBlock data³, this share has been steadily growing since 2022. This trend highlights the increasing demand for decentralized Perpetuals, driven by the launch of new solutions.

The success of Perpetuals lies in their immediacy and versatility. They’ve proven useful not only for speculative purposes, but also as adaptable tools that integrate smoothly into broader crypto strategies involving other products, making them a fundamental piece of DeFi composability.

For this reason, after gaining experience with other financial derivatives, Denaria decided to launch a research initiative to deeply explore the DeFi Perpetual landscape, with the aim of contributing to the development of an innovative new product in this category.

Taking the right path

The research paper - Perpetual Future Contracts in Centralized and Decentralized Exchanges: Mechanism and Traders' Behavior⁴ - provides a clear summary of the main approaches used so far to build these types of products.

Leaving out centralized architectures for obvious reasons, the paper highlights three primary approaches, differentiated by their level of decentralization and performance (measured in transactions per second):

• Hybrid Model: These architectures keep the financial engine, typically the order book , offchain in order to improve efficiency. The main trade-off is that a fundamental part of the product is not on the blockchain, raising concerns around transparency and security.

• Oracle Price Model: This model aims to allow traders to execute orders as close as possible to the actual market price. It does not rely on financial engines like order books, but instead uses passive liquidity pools provided by LPs.

• vAMM Model: These architectures offer the highest level of decentralization by leveraging one of DeFi’s most important innovations: Automated Market Makers (AMMs). This model allows the entire financial logic to be executed fully onchain through transparent formulas based on virtual AMMs, meaning no real tokens are involved in the accounting mechanism.

The first step in our research was to rebuild a clear picture of the current market landscape. It quickly became evident that many new Hybrid solutions were emerging. Several teams focused on building products with offchain order books or on highly optimized Layer 1s capable of supporting high transaction throughput.

However, it remains unclear whether these designs represent true long-term alternatives to overtly centralized infrastructures. We chose to discard this approach primarily because it clashes with what we believe is the native philosophy behind DeFi protocol design, that no critical part of the product should live offchain.

We did our homework

From the very beginning, Denaria had a clear guiding star: building a truly onchain protocol for the long term means avoiding any decentralization shortcuts in pursuit of efficiency.

This is why it was essential to deeply study solutions that, despite trade-offs in scalability and performance, stayed true to this philosophy, avoiding the pitfall of directly competing with centralized infrastructures, which are by nature and definition always going to be more efficient.

One of the most impactful ideas was the Oracle Price Model, which gained significant traction with the launch of GMX v1, one of the first more decentralized perpetuals protocols.

The feature of zero slippage was widely praised, but it also led to exploitative strategies⁵ that drained protocol liquidity in 2022. This eventually pushed the development of GMX v2, which introduced slippage to limit these behaviors, thus tempering one of the protocol’s core advantages.

vAMM models introduced genuine innovation. A notable early example is Perpetual Protocol, which adapted Uniswap v3 technology to create a virtual AMM capable of applying the concept of concentrated liquidity in this new context.

The main strength of these protocols lies in their use of a battle-tested technology, proven through years of spot trading in DeFi. However, extensive analysis and real testing revealed a major issue: LPs in this system faced significant losses in trending markets. Acting as the natural counterparty to trades meant that LPs were exposed to losses whenever the market moved by a significant percentage, a scenario that is all too common in crypto.

Furthermore, the funding rate played a central role in this imbalance: it incentivized traders to align internal market prices with oracle prices, effectively transferring the value of this inefficiency to traders, and penalizing LPs.

The picture, then, became clear: protocols using AMM-based vAMMs had chosen a reliable and proven approach, but they suffered from scalability challenges.

If LPs don’t see a clear path to profitability, they won’t provide liquidity meaning the protocol cannot scale, and cannot offer real execution efficiency.

From the analysis of the different approaches and the issues encountered, a new idea has emerged. A way to combine the best elements of the approaches used, in order to minimize the negative aspects identified in the previous designs. This idea has been the key to all the innovations behind the Denaria Perpetual Exchange.

Dynamm is in town

The core idea was to design a Dynamic Virtual Automated Market Maker - or dynAMM: an evolution of the traditional vAMM model that introduces a dynamic component aimed at reducing inefficiencies and enabling more rational outcomes for both traders and LPs.

Unlike standard vAMMs, and even traditional AMMs, the dynamic approach ensures that traders always operate near the actual market price.

In standard vAMMs, the trading price is an internal market price that depends on the trading activity itself. If there is a surge in long trades within a short timeframe, the internal price can rise significantly, causing a divergence from the external price (i.e., the oracle price).

The funding rate is introduced in this setup as an incentive mechanism to push traders to realign internal and external prices. However, as previously mentioned, this model introduces two key problems:

1. Price divergence allows traders to execute orders at misaligned prices.

2. LPs are forced to act as the natural counterparty to long and short trades executed at advantageous prices for the traders, incentivized by the funding rate, ultimately exposing LPs to adverse PnL and making them easy targets for arbitrageurs.

The dynAMM approach completely changes this behavior. Instead of executing trades at an internal market price, the vAMM is forced to stay aligned with the oracle price. It achieves this by dynamically adapting its liquidity curve before each trade to match the current external (oracle) price. In practice, this combines the best of both worlds: the battle-tested mathematical foundation of AMMs, and the marke price execution logic typical of the Oracle Price Model.

The base AMM chosen for this approach is Curve’s CurveSwap⁶ ⁷, a flexible and efficient AMM particularly effective at managing slippage, and optimized here specifically for this use case.

This design introduces multiple benefits for users:

• For traders, it ensures that, in sufficiently liquid markets, they can trade within a tight and meaningful range around the oracle price with a very low and optimized slippage.

• For LPs, the advantages are even more significant: they can act as the natural counterparty to trades executed at oracle prices, resulting in more sustainable and optimized long-term profitability.

The theoretical assumptions behind dynAMM were then validated through extensive simulation campaigns, which confirmed that this dynamic approach provides clear advantages over static vAMM models adapted to Perpetuals.

The path we chose proved to be effective both in theory and through practical simulation.

Innovation back-to-back

Such a radical shift in the core design of the financial engine led to a series of subsequent innovations, as every component of the product had to adapt accordingly in order to form a coherent and harmonious architecture.

Here are some of the most interesting innovations that emerged from this new approach:

• LP shares Tracking = In Curve’s approach, naturally designed for spot markets, Liquidity Providers can contribute by depositing any asset, and the accounting system tracks their share of the pool based purely on percentage ownership, regardless of which asset was provided.
  Our design goal, in adapting this system to a leveraged trading environment, was to introduce an accounting mechanism that instead tracks the LP’s share of stablecoins and virtual assets over time. This enables a more fair distribution of fees: for example, if an LP provides liquidity in virtual assets, they are effectively offering liquidity for traders’ short positions, taking on a passive long exposure, and in return, they earn the fees generated by trades in that direction.
  This design introduces a significant technical challenge, mainly due to the constraints of writing to the blockchain. We solved this elegantly with a snapshot and matrix-based accounting system.
  This system allows LPs to provide asymmetric liquidity based on their expectations of long or short trading volume, and to earn fees proportionally, acting as the natural counterparty to those trades. Thanks to this mechanism, LPs are not inherently exposed to asset price fluctuations unless their liquidity is actively involved in a trade.
  This gives them the flexibility to design and implement more sophisticated passive strategies.

• MultiStable Vault = Alongside the AMM, the Vault is the other core component of the architecture. It is the part of the system responsible for holding the collateral provided by the various actors interacting with the financial engine.
  Every trader who opens a position does so by directly depositing funds into the Vault. Our intent was to build a Vault that accepts stablecoins, and the growing competition in the stablecoin market inspired us to design a system capable of supporting multiple different stablecoins.
  The Vault was therefore built to handle n different stablecoins, with a target stablecoin ratio defined at the time of pool creation. A set of incentives is introduced to keep that ratio as close to the target as possible over time. This design allows most traders to operate using their preferred stablecoin, while giving LPs a clear and reliable framework for risk valuation.

• Funding Rate = At the core of the protocol is the principle that traders should execute at the oracle price, effectively moving beyond the traditional distinction between market and oracle prices.
  As a result, classic implementations of the Funding Rate, which calculate incentives based on the delta between the prices, are no longer applicable.
  However, there is still a strong reason to retain a funding mechanism: to further reduce LP risk. To achieve this, it’s essential to incentivize a balanced volume between long and short trades. This ensures that LPs can rely on protocol-shared fees without being exposed to net market positions.
  To support this goal, a new type of Funding Rate was designed, one that depends on the global trade exposure, which by definition is the inverse of LP exposure.
  This funding model encourages traders to take the less common side of the market, while disincentivizing trades that would further increase the dominant exposure, thereby helping protect LPs from imbalance-related risks.

We made the interfaces simple, not the systems

All the complexity introduced by these innovations and technical challenges should never distract us from the core principle: User First.

From day one, our approach has been to abstract away the complexity, creating an interface that removes all barriers to simple and intuitive usage. To achieve this, we built the interface using several innovative technologies, including Smart Wallets, Passkeys, Progressive Web Apps (PWA), and more.

This allows a trader to sign up using just an email, generate a smart wallet via a device-native passkey, and access the app seamlessly from mobile.

We strongly believe that while the design should carry all the internal complexity required to overcome technical limitations and achieve specific goals, that complexity must be completely abstracted from the user, bringing the user experience back to the center of product design.

Having a mobile-first interface highlights our radical approach and our commitment to attracting users who prefer to trade on mobile but currently have limited options among the more decentralized protocols. Of course, this won’t be the only interface available, as the DeFi standard is still largely tied to desktop-based products.

Building DeFi, from scratch

The publication of this Whitepaper marks an important milestone in the journey toward bringing this product to life. The process described in this article also aims to share the core values that have guided every step of our journey.

This product is designed to contribute to the ongoing construction of DeF, a movement we believe should be focused on finding innovative ways to decentralize every layer of the protocol, starting, of course, with the core components.

We believe that building with this mindset benefits the entire space: on one hand, it proves that it’s possible to create products that are truly distinct from their centralized counterparts; on the other, it encourages the healthy habit of relying on external services, such as oracles or passkeys, that are aligned with the same philosophy, supporting a more decentralized ecosystem and pushing DeFi in that direction.

To do this, one must be willing to design products from scratch, not the easiest and fastest path, but certainly the one that best supports the evolution of DeFi.

References:

1. Derivatives - IntoTheBlock

2. Spot - IntoTheBlock

3. Futures - IntoTheBlock

4. Perpetual Future Contracts in Centralized and Decentralized Exchanges: Mechanism and Traders' Behavior

5. GMX Hack

6. Stableswap Paper

7. Cryptoswap Paper

In today’s article, we will cover:

• What happened before the testnet

• Introduction to the testnet

• How to access the testnet

• Points campaign update

• How to claim testnetUSD and start trading

What happened before the testnet

Denaria released the first version of its perpetual demo in late September. This off-chain product was primarily designed to test the app’s UX, the underlying trading engine, the passkey system for managing wallets, and other key components of the upcoming perpetual platform.

As mentioned earlier, the demo was a huge success, and its end coincided with our experience in the Ethena Accelerator program, which we won.

Today, the next phase begins—Denaria is running its testnet on-chain, with smart contracts deployed on the Linea Sepolia testnet.

https://x.com/DenariaFinance/status/1901665626734600340

Introduction to the testnet

Today, anyone can access the Denaria App, and trade with testnet funds.

Initially, traders can open long and short positions on **$BTC **with up to 15x leverage. More assets will be listed in the coming weeks.

Unlike the previous demo phase, this testnet runs entirely on-chain. This allows us to test all smart contracts, optimize performance, and identify potential bugs before the final on-chain deployment on Linea.

https://x.com/DenariaFinance/status/1902462601113825334

How to access the testnet

For new users, onboarding is simple:

1. Get the mobile app -> https://demo.denaria.finance/?ref=blg-tsnx, and use the invite code: blg-tsnx

2. Create a testnet wallet linked to your email.

3. Secure your wallet with biometric authentication (e.g. Face ID for iPhone users).

A smart wallet will be created using Zerodev’s technology stack.

For existing users, the process is similar, as they’ll also need to create a new testnet wallet using the same email they were using in the demo phase.

What Happens to Previous Demo Balances?

• Demo balances have been erased. Each new user will start the testnet journey with a welcome bonus of 2000 testnetUSD.

• Extra DXP points will be airdropped soon based on the wallet value traders achieved in the past months. You can find more info about the conversion from demoUSD to DXP in this dedicated post.

• Existing DXP points from the demo phase remain valid and will be added to new points earned during the testnet phase.

Finally, it’s important to note that the team may update the system at any time during the campaign to release critical updates, possibly without prior notice. This could lead to the forced closure of all open trades. Any updates will be communicated through official social media channels—and whenever possible, in advance.

Points campaign update

During the testnet phase, we are boosting the points campaign, with more DXP available daily for active users.

Similar to the demo phase, users who complete the Proof of Personhood by Anima, will earn 10x more points across all tasks than those who don’t. We are doing this to ensure a fair campaign that rewards real users over bots and sybils.

The following table represents the DXP point rewards for the 'daily log-in task' which, as you can see, increases when the log-in is consecutive day by day.

Once the highest tier is reached, it remains active as long as the trader logs in daily.

Other DXP rewards include:

• 50 DXP for completing the Proof of Personhood process.

• 40 DXP, with completed Proof of Personhood, per day for completing a new trade.

• 250 DXP for inviting new users using a referral code.

• Stay tuned for more opportunities to earn DXP!

How to claim testnetUSD and start trading

Similar to the demo phase, traders can claim a daily allocation of testnetUSD. The amount increases when claimed consecutively each day.

Also here, once the highest tier is reached, it remains active as long as the trader claims daily.

Note: In the first few days, early testers who quickly engaged with our testnet received thousands of testnetUSD for their trades. The new DXP distribution ratio will be adjusted tomorrow according to the above table.

Start your testnet journey and earn DXP!

Denaria is building a revolutionary perpetual DEX based on a dynamic virtual AMM "dynAMM", prioritizing both trading performance and decentralization.

This testnet is the final step before the mainnet launch, and early testers play a critical role in refining the system.

Keep testing, stack as much DXP as possible, and unlock future rewards!

The new era of decentralized trading starts now!

Follow our X account, to stay updated on the next steps in the testnet, and join our Telegram and Discord communities for any questions or to contact the team.