Happy tiding to members of this wonderful community how are you doing, hope all is going well.today I will be discussing on the security risk associated with defi.but before I fully jump into the topic I will throw a little light on some terms.

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what is Defi(Decentralized finance)

In simple terms or in simple wording decentralized finance (defi) can be defined as an umbrella term for peer-to-peer financial services on public blockchains.it can also refer to to a rang of financial application which is built on Blockchain technology which operate without any involvement of centralized intermediaries .Decentralized finance is one of the rapidly growing finance area of cryptocurrency possess the potential to revolutionize the financial sector.in respective of other traditional finance,that is centralized and their actions are controlled and regulated by banks and other financial institutions, while with defi,user have the ability to assess financial services without needing any other intermediaries .So of the security risks includes smart contract vulnerability,

Smart contract vulnerabilities

this on its own is one of main security risk on defi,before preceding I like to enlighten on what are smart contract,the are refer to a self-executing program which automates the actions that is required in an agreement or contract.this are what controls the operations carried out in defi protocol,and if not securely documented,they can be issues such as exploitation from hackers.
Some of the smart contract vulnerabilities includes ;
Time dependency attack
When a specific smart contract tend to rely on a specific time information, attackers may arise and try to manipulate the information in essence exploit the vulnerabilities in that contract
Reentrancy Attack
If a smart contract is to be executed,it has the ability to call other contracts that in turn also have the ability to call back into the original copy ,in essence making it easy for attackers to withdraw funds numerous times.
Integer overflow/underflow Attack
When the code of a smart contract performs mathematical operations which tends to overflow or underflow,when this happens attackers can use this opportunity to exploit this and also manipulate values of variables, and also making room for them to potentially steal funds.The next is liquidity risk

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Liquidity risk

Liquidity can be defined as to how easily an asses can be bought or sold,or the availability of the asset for buyers or sellers.when we talk about liquidity risk in defi we are only referring to the potential a lack of liquidity in the market and this can evolve and have a negative effect on the users ability to make trades .this liquidity risk arises for lot of reasons
1) lack of participants
When they are not enough or adequate users and investment principalities in a particular defi market, liquidity may depreciate.
2) impermanent loss
This happens when users tends to provide liquidity to a decentralized exchange,this make the vulnerable to impermanent loss,which is a loos that occurs when there is a change in price of asset providing liquidity.and this can have a great effect on the users,the effect can go as far as discouraging the user from providing liquidity,and also reducing liquidity in the market.
3) lack of market makers
This are personals or institute which provide liquidity by buying and selling of assets in the market.

Thanks for reading