Diving into DeFi - Do We Have Any Concern About Security In DeFi?
Hello All,
Do We Have Any Concern About Security In DeFi?
C H A P T E R - 2
We have seen many opportunities into the DeFi and we all are excited to take a step into the DeFi, most of us may be already entered.
If you are thinking like everything looks easy into DeFi, all options are available to earn with DeFi, it's good but here need to think more before entering.
Things are not bad but sometimes we play blind. Find Good things and work on it is quite simple but on the other hand, we also need to see the risk factor when its a matter of money/investment. So in DeFi what we can do as a safety.
| Investing does not come without its own risks. When so much money flowing around extra care must needed. |
D e F i
DeFi is a system of open, permissionless, and interlocking financial products with a focus on borrowing, lending, and banking services. Decentralized finance is still in its infancy. DeFi is based on a network of dapps and smart contracts.
What is a dapp (decentralized application)?
Dapps are decentralized apps. They are like normal apps and offer similar functions, but the only difference is they are run on a peer-to-peer network, such as a blockchain.
That means no one person or organization has control of the network.
What are Smart Contracts?
Smart contracts are bits of computer code that perform automatically according to a set of instructions.
| A smart contract can only be used for one type of transaction. A Dapp however can bundle multiple smart contracts together to do more sophisticated things. |
DeFi Platforms Are Only As Safe As The Code They Have.
R I S K
Developers can’t change smart contracts once the rules are baked into the protocol. This makes bugs permanent and could result in material loss of assets.
Major Incidents
In April, the Lendf.me and Uniswap lending platforms witnessed hacks that resulted in $25 million worth of funds being stolen from the two platforms. According to reports, the hackers used an exploit that had been reported by a cryptocurrency security auditing firm. source
Fixing issues is a complicated
As it is a distributed network, fixing issues and updates require everyone who uses the DApps to update their network and all the copies in their network. Also fixing the bugs is more complicated compared to a conventional website application.
DeFi Safety
DeFi projects are open source and so their code is auditable. However, the majority of cryptocurrency users do not possess the technical knowledge to audit the code nor have a reliable method to check the security of the DeFi platform.
How can a regular user know whether or not a DeFi platform is safe? Should they blindly trust the smart contract written by an unknown programmer?
Most DeFi projects supply the audit report of their platform. Other than that there are specialized teams for auditing these protocols and providing the scores based on security and transparency.
You can find those details on sites like below
defiscore.io
defisafety.com
1. Try to avoid investing in unaudited protocols unless you are fully aware of the risks and can stomach the loss.
2. Don’t invest money that you cannot afford to lose. You can Invest small and then re-invest from the profits
3. Do some research and identify protocols that are likely to exist for the longer term.
Precautions
Users interact with Decentralised Applications (or DApps) to access DeFi services, which are connected to their crypto wallets. When a user connects their wallet to a DApp, the user is asked to approve access to their tokens, allowing the DApp to interact with the wallet.”
The security issue here, it has been noticed that most DApps users grant access to all of their holdings in that token. So if a DApp is vulnerable or malicious, to begin with, attackers can abuse these privileges to steal all the user’s holdings without their consent.
Therefore, users could take precautions such as holding separate wallets that interact with separate platforms: ideally, then, a compromised DeFi platform wouldn’t have access to all of a users’ funds. OR while allowing permission try to provide access for a small amount instead of the entire holding.
FINAL WORDS
The DeFi market is tiny compared to traditional finance, but it has picked up its pace rapidly since last year. With more projects and financial dApps we can expect to reach a genuinely decentralized financial reality where the traditional finance market is interoperating with digital assets.
DApps is the present sensitive topic in the cryptocurrency field. It will facilitate the cryptocurrency exchange platforms in a great way only when it is adopted based on certain standards. Analyzing the pros and cons, Adopting the DApps in cryptocurrency is a great boon.
What's Your Concern About Security In DeFi?
Thank You.
@stream4u
#steemcryptochallenge
#india
#defi
#decentralizedfinance
That is a strength as well as weakness. Strength in the sense that how well it is coded(flawless) to make an agreement between two parties trustless in DeFi.
Weakness in the sense that if it is with a flaw, likely to be exploited by the malicious elements, as has been the instances of hacking in past.
It is always desirable to have a briefing of the project you are investing in. In decentralized world one has to do on its own, many resources available to check the legitimany of a project.
Overall, I think this hype is likely to stay. Financial use-cases are always strong by default. It has all the potential to bring the players from the legacy financial ecosystem.
Thank you.
#twopercent #india #affable
Thank you.
Correct, anyone who is capable of writing smart contracts can able to create DeFi applications. Now they only know what they have coded and we can not see it by just front view.
As human nature when everything looks the same and somewhere getting a lot of profits, we just jump. I will say every one to make sure about the contracts as much as possible, double-check their audit scores, documentations. Information is already given for an example of how we can cross-check.
#onepercent #india #affable
In a permissionless thing, everyone knows what they have coded. It is a separate thing that it takes a tech savvy knowledge to understand it.
Very true.
Well detailed post from you.
Lot if people dint think about security and safety of their funds,blindly investing then loosing those.
Before investing any new project,first need to research their trust and reviews,and it having audit or not.
Very informative post from you. Have a great day ahead.
#twopercent #affable #india.
Thank You.
Have a great day my friend.
#affable #india.
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