It has a fixed maximum number of concurrent sockets, and each socket has queues backed by per-socket fixed-size transmit and receive buffers (see `rxmem` and `txmem` in `struct tsocket`[1]). This is fine, because in TCP, each side advertises remaining buffer space via the window size header field [2] (possibly with its meaning modified by the window scale option during the initial handshake - see [3] & `struct PACKED tcp_opt_ws`), and possibly also how much it can maximally receive in one packet (via the MSS option on the initial handshake [4]; possibly modified by intermediary systems via MSS clamping). wolfip has unusually small buffer sizes, and hardcodes them via #define, and everything else (e.g. congestion control) is pretty rudimentary too, but otherwise it's pretty much the same as in a "normal" implementation.
[1] https://github.com/wolfSSL/wolfip/blob/60444d869e8f451aa2dca... [2] https://github.com/wolfSSL/wolfip/blob/60444d869e8f451aa2dca... [3] https://github.com/wolfSSL/wolfip/blob/60444d869e8f451aa2dca... [4] https://github.com/wolfSSL/wolfip/blob/60444d869e8f451aa2dca...