How To Spot Scams In DeFi Protocols

There are a variety of DeFi protocols, each with its own set of goals. For example, Crypto lending platforms are built with crypto lending features in mind, but the DeFi yield protocol is built with yield farming in mind. The Panther Protocol, for example, is a privacy-focused ecosystem. The number of DeFi protocols is many, solving varying issues in the space. 

Though there are innovative platforms in the DeFi space, some are unscrupulous and designed to fleece users. Some projects are explicitly designed to rug pull their users after a while. In some cases, a DeFi protocol may sell a tall tale of its road map with little or no plans of achieving it. After token sales, they ghost the project. Therefore, it is crucial to consider some criteria before deciding on a DYP crypto to add to your portfolio. 

• Project Audit

DeFi protocols are targets for hackers, as history has shown, meaning that an intelligent project undergoes audits regularly to look for bugs and loopholes that attackers can exploit. External parties do these audits. Has the project audited its smart contract? 

• Project's Aim

Why was the project created? What does the project intend to achieve? 

It is crucial to find out the unique selling point of DeFi protocols before you get involved in them. Some of these protocols have a core purpose of solving the issues noticed in existing platforms. 

• The Team

The teams behind DeFi protocols can make or mar them. Some teams are notable for churning out innovative projects. They are involved in development activities in the open-source space and have a portfolio of existing innovations. 

• Tokenomics

Another crucial aspect is the Tokenomics of the project. What is the maximum number of tokens that will exist? How are the tokens distributed? What is the lock period for the developers? Analyze the Tokenomics thoroughly to see if it is favorable to users.