DeFi finance is getting popular in the cryptocurrency market. And a lot of people are now investing into various DeFi projects. However there are things people should know before they invest otherwise they risk losing their investment. So here I am trying to point you towards some of the scams that are likely to be around in the name of DeFi.
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Let's take a look at most common scams in crypto market.
Centralized Company behind Decentralized Finance
This is a big giveaway where you may find that some UNISWAP clone is created and there is some corporation is behind it. They are going to sell the tokens and exit the market by handing over the company to someone else. This is classic exit scam where they hype is generated till people lose investment after they get sold to another company.
Market Pump and Dump
A lot of community leaders and influencers tell you to invest into the token. Once they ask you to HODL and the price stays up. They exit by selling their share. So this pump and dump is basically for their exit from the market. A lot of token owners have done this. And their DeFi is like rat trap for investors.
500% YIELD
Have you been getting unbelievable amount of yield for some electronic product which is totally unrealistic. This is a phase considering people are just randomly throwing and selling stuff. Though some farm tokens may give you that much yield but it is totally unrealistic for future and the consistency in the market.
Security Loopholes
Does the site breaks when the bitcoin price is high? Does the site declares money or token loss after market rise. Do they declare the bankruptcy after they press release about the loss of coins or wallet or even their exchange? If that is something you have noticed then you can see you have found out how they exit the market using security as a reason.
DeFi Centralized Code & Infrastructure
Decentralized 100% is impossible. Someone needs to pay for infrastructure and someone needs to get their investment out. Having private code and the infrastructure can be pretty much bad as it wont be defi but more of CEFI. So make sure any DEFI claims what it is how much it is open in the market.
Pre-Sale, ICO and Staking
A lot of DeFi projects run startup to sell some token, do the ICO and even go for the staking options for the investor. All that to build up hype only to get acquired. Underlying technology is not even worth more than 2 years worth of efforts. A lot of such coins are being released into the market. Such projects end up being scam in DeFi.
Take away
Just because any coin is out there in the market does not mean we need to invest into it. DeFi projects need to be backed by something credible which is not easy thing to do. Just because elon musk says it and some other big guy tells you to invest into it does not mean you should follow.
- Pay attention to the returns of the investment. Anything 3 figure investment, be careful.
- Make sure to not lock your coins into such platform for more than 30 days.
- Avoid staking your coins for more than 180 days.
As you can see DeFi concept is strong but the implementation has a lot of loopholes and that means more means for people to take advantage of your investment through scams.
Very well said. Most time I always tell people that stuffs that promise higher good return need to be careful of because most of them turns to be scams
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