HOW TO IDENTIFY SCAMS OF DEFI PLATFORMS - (10% to @Tron-Fan-Club)

Greetings,

It's your friend @mondraye and today I would be sharing another important content on how to identify scams of DeFi platforms.

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INTRODUCTION

Innovation abounds in decentralized finance (DeFi). It's really challenging to stay up, let alone DYOR, as new DeFi initiatives appear to be starting every minute.

Blockchains are frequently described as "permissionless," which is just a fancy way of expressing "public." No permission is required in order to utilize them, create for them, or initiate projects on them. Although cryptocurrencies like Bitcoin have this value built in, it also has drawbacks.

There is nothing in place to prevent the establishment of dishonest or fraudulent projects by anyone. Technically, there is still something since as a community, we can work to discover certain common traits that distinguish honest breakthroughs from deceptive junk.

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How to identify scams

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In other to identify scams, a used should look out for certain things which includes;

• What is the purpose of the project.

This will obviously be seen as a common question anf therefore be easily discarded. It is true that many DeFi platforms do not offer anything new where as there are few that have chosen to innovate thus brining in new things into the DeFi ecosystem.

Regardless of the above, it is always best to ask questions such as, "what is the aim of the project", "how does it plan to achieve it?", "what difference does it offer from its competitors", etc. By asking such questions, you can easily pin point scams.

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• Development activity

This is another part you will love to pay attention to especially if you have a good knowledge on coding.

With DeFi being an open-source platform, you can easily observe the development activities by looking at the codes. With that, you can get to find out if developers are constantly adding new codes and that they are doing so, that will tell you that there's a possibility of scam.

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• Smart contracts audits

Auditing is a term that is frequently used in connection with DeFi and smart contracts. The purpose of audits is to confirm that the code is safe. Many developers launch their code without any audits, despite the fact that they are a crucial component of smart contract development. Utilizing these contracts can become much riskier as a result of this.

Audits are expensive, as should be noted here. While fraudulent projects frequently won't bother, legitimate projects can usually afford audits.

Does this imply that a project is fully safe to utilize if an audit has been performed on it? No. Although audits are important, they will never guarantee complete safety. Always be conscious of the dangers involved with putting money into a smart contract.

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• Are the founders annonymous

There's no doubt that anonymity is common in the world of cryptocurrency and decentralization. But this does not mean that you shouldn't be careful while dealing with decentralized finance platforms.

Based on statistics, most DeFi platforms that has been later discovered to be scams are those with annonymous teams.

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• How are the tokens distributed

How the platform token is distributed is another thing to consider. Are they distributing via ICO? or is it via IEO whereby a cryptocurrency exchange is backing them, or is it via airdrop which will certainly lead to a maddening sell off in the future.

Finding out their tokens is distributed is a good way of knowing if the platform is just after some quick gains thus making it a scam.

Summary,

DeFi scams are rampant because there's no standard means of finishing out fraudulent activities. This is why it is our duty to manaully fish out possible scams by carrying out proper research and asking questions before providing liquidity or trading with our funds on any DeFi platform.