DeFi risks checklist: 10 things to check before you deposit

The checklist

1. Is this the real site? Type the address or use a bookmark. Fake DeFi sites are the most common way wallets get drained.
2. How long has it run, and how much is deposited? Newer, smaller apps carry more risk.
3. Has it been audited, and by whom? Read whether issues were fixed. Many hacked apps had audits.
4. Where does the yield come from? Trading fees, borrower interest and staking rewards are real sources. Token emissions and "guaranteed" returns are not.
5. Who can change the contracts? Admin keys or upgradeable contracts mean a small group can change the rules.
6. Can you exit easily? Check withdrawal limits, lock-ups and whether the pool has enough liquidity.
7. Does it rely on a stablecoin or bridge? A depeg or bridge hack can hit you even if the app itself is fine. Stablecoins compared.
8. What can liquidate you? If you borrow, know the price at which your collateral is sold.
9. What are you approving? Avoid unlimited approvals, and revoke them afterwards.
10. Which wallet are you using? Keep a separate hot wallet for DeFi, and your savings in a vault wallet. Wallet security checklist.

Red flags

• Returns that are fixed, daily or "guaranteed".
• Pressure to deposit before a deadline.
• Support that contacts you first on Telegram or WhatsApp.
• A site that asks for your seed phrase. No real app ever does.

If it goes wrong

Move what's left to a new wallet, revoke approvals and keep records. What to do if you've been scammed.

Sources

• Income Tax Department: Acts, rules and circulars

• defi
• security