Blockchain technology and cryptocurrency have revolutionized finance and global economies in more ways than even the most optimistic believers thought possible. Decentralized finance (DeFi) and DeFi products that facilitate traditional financial services using blockchain have become the most popular applications of blockchain technology. However, DeFi’s popularity comes with associated risks, with poor regulation, implementation barriers, and fraudulent activities sitting high on that list.
Also known as the “Wild West” of the blockchain, DeFi has many opportunities, rewards, and potential for expansion as much as it has risks. This new economic system affords users greater control and accessibility to financial tools (staking, liquidity provision, yield farming, staking, etc.), more earning opportunities, better borrowing services, higher APRs on lending, etc. The possibilities are endless for DeFi, and a no-code, easy-to-deploy DeFi integration solution such as Forward Protocol makes it accessible to an even larger audience.
According to Elliptic, DeFi services grew by more than 1,700% to a value of $247 billion in the past year alone. Another $12 billion has been lost to DeFi exploits this year alone, with fraud and theft accounting for more than 80% of that figure. These new numbers represent a 700% increase of the same statistics over 12 months. It is evident that the rewards far outweigh the risks, and as abstinence is not an option, what can the average DeFi user do to protect themselves in this volatile, high-risk, higher reward market?
Common DeFi Scams
DeFi scams come in various forms and differing levels of sophistication. However, one thing these scams have in common is that they usually sound too good to be true. Some of the most common scam attempts you’ll face in this space include –
These are the most common types. It only takes a fake social media account and a sweet tongue to mislead the unsuspecting victim. Communities are at the heart of DeFi, offering learning and earning opportunities for users. Fraudsters know this too, and they exploit it. They duplicate reputable social profiles that are almost indistinguishable to the untrained eyes, and interact with unsuspecting victims. They lurk in legitimate communities, making ludicrous claims and promising exorbitant returns for a small token or favor upfront.
Do not send crypto, your seed phrase, or any other personal information to a stranger on the internet, no matter who they claim to be. If it sounds too good to be true, it probably is.
Phishing is a more sophisticated attempt to relieve you of your crypto. It usually takes various forms and different levels of misdirection. The end goal is to make you give up personal information such as login credentials, seed phrase, social security, and other personal information. It usually starts with a suspicious-looking message from a strange source or imitates a site you might have interacted with. It usually includes a link that redirects you to a page where you will be directed to share personal information.
Always double-check links that you interact with before you enter any personal information.
- Fraudulent Token Offerings (ICOs, IDOs, IBOs, IEOs, NFTs)
Of all DeFi scams, perhaps these are the hardest to identify. Most crypto projects usually host some form of fundraising event to kickstart their projects. Most of them make ambitious plans, but very few follow through. Some fail because of technicalities, while others are outright scams. They lure investors in, sell them on the dream, and make away with investor funds.
Always do your own research (DYOR) before you send crypto to any project. An endorsement from a celebrity or social media influencer should not take the place of common sense and doing your own research.
- DeFi Rug Pulls
Everyone has fallen victim to a rug pull at least once, and it is nothing to be ashamed about, except you keep falling for the same tricks. Always DYOR before you buy into any project. Verify the team behind the project, and in the case where they are anonymous, verify their social reputation.
Forward Protocol provides the ultimate blockchain adoption toolkit through a WordPress-like model that uses smart contracts and applications to seamlessly integrate blockchain functions and Web 3.0 capabilities into any system. The protocol’s modular design allows any organization to choose the module suited to their platform and modify it to be functional for their use case. Forward Protocol’s solution provides unfettered access to the DeFi space and all the opportunities it offers.
Forward Protocol has a vibrant community on Telegram, Twitter, Medium, YouTube, Discord, Instagram, and Facebook. These channels are responsible for disseminating accurate information and acquainting new users to the best that DeFi and Forward Protocol offers. Unsurprisingly, these characters also see these vibrant communities and see opportunities to defraud community members. A few have even infiltrated Forward Protocol’s online communities, spreading unsubstantiated claims and promising guaranteed returns on investments. It only takes a keen observer to spot these impersonators and phishers in the community.
Forward Protocol held its Token Sales on 13h and 15th of December, 2021, on DAO Maker and MahaStarter’s Launchpad, respectively. Forward Protocol’s strong holder offering (SHO), held on DAO Maker on the 13th of December, raised $100,000 and reached 29.2 million DAO locked, coming very close to DAO Maker’s all-time record of 29.6 million DAO locked! The 15th of December Initial Blockchain Offering (IBO) event on MahaStarter raised $100,000 within 13 seconds from 816 wallets.
In this new world, as facilitated by Forward Protocol, the user has great power and even greater responsibility. To stay safe within Forward Protocol’s community and every other DeFi space, you need to be able to spot these falsehoods and fraudulent claims.
About Forward Protocol – Forward Protocol uses an easy-to-use WordPress-like model to facilitate a no-code environment that users can use to deploy their blockchain applications without technical knowledge. Forward Protocol has elements of NFT, DeFi, Gamification, AI, ML and Social Tokens inbuilt that connect the value-driven economy. Applications and smart contracts from Forward Protocol can be deployed on any EVM compatible chains in one click. Forward Protocol is cross-chain compatible, industry-agnostic, and adoption-focused, with an ultimate goal to fast-track mass adoption of Blockchain Technology.