What makes Decentralized Finance (DeFi) so prosperous is also risky. DeFi is available for anyone with an internet connection. As such, the non-crypto-literate can lose money through errors. Therefore, anyone can fall prey to scams and exploits.
As a way of reducing risks and losses, we give some dos and don'ts as a way of keeping you secure in the DeFi journey.
1. Do Not Share Your Private Key
Never share your wallet's private key with anyone, even if it is an admin of a group or project team member. Your private key is the only thing someone needs to steal your tokens.
This, of course, requires understanding the difference between private and public keys. Anyone with access to your private key can move your funds away from your wallet.
2. Always Store Significant Funds in Hardware Wallet
By storing your funds offline, thieves and hackers cannot access your funds. A hardware wallet (like Ledger or Trezor) requires a physical presence to move assets.
Additionally, a cold wallet is always the best when holding your funds for an extended period. Even centralized exchanges use cold wallets to prevent hackers from gaining access to their funds.
3. Never Visit the Website of a Randomly Airdropped Token
Only interact with reputable and time-tested projects. Besides, clicking on unknown links can make you vulnerable to hackers and lead to hackers having access to your wallet.
4. Do Your Own Research (DYOR)
Know what you are buying or selling, and ensure the token or contract you are interacting with is not a scam.
This is very important while dealing with any DeFi project because 95% of tokens on Uniswap are created by scammers trying to milk the funds of innocent people.
Therefore, to protect yourself, constantly research yourself. Don't allow social media influencers to research for you because, most times, their research might need to be more accurate.
5. Enable Multi-Factor Authentication for All Wallets and Accounts
In this Defi space where hackers are emerging with new strategies to steal people's funds, it is necessary to have two or 3-factor authentications for your wallet.
Having Multi-factor authentication will make it difficult for hackers to steal the funds in your wallet.
6. Be Careful of Anonymous Finders
The world of crypto is deep-seated in the freedom of anonymity (and pseudonymity) that the Internet can provide.
Anonymous founders still pose an additional risk you need to consider. If they turn out to be scammers, there's a good chance they cannot be held accountable.
While on-chain analysis tools are getting more and more sophisticated, it is still different if the founders have a reputation at stake that's tied to their real-world identity.
Takeaway
The industry is also very young, and bad actors are looking to exploit new investors due to their lack of technical knowledge.
Carefully following all the safety measures stated above will go a long way in helping you to secure your funds while going through the jungle of DeFi.
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