DeFi Risks & Safety

Understanding and managing risks is crucial for DeFi participation.

Smart Contract Risks

Code vulnerabilities

Flash loan attacks

Oracle manipulation

Billions lost historically

Use audited protocols

Check bug bounty programs

Avoid brand new protocols

Start with small amounts

Occurs in liquidity pools

When prices diverge

Can exceed trading fees earned

Borrowing positions

Price drops = liquidation

Maintain healthy ratios

Never invest more than you can lose

Diversify across protocols

Understand what you're using

Anonymous teams

No audits

Unrealistic APY

Locked liquidity? Check!

Copied code

Research before investing

Check contract on Etherscan

Follow trusted sources

If it seems too good, it is

✅ Protocol audited by reputable firm

✅ Team is known and accountable

✅ Reasonable APY claims

✅ Liquidity is locked

✅ Active community and development

✅ You understand how it works