The R Roundup Presents: Staying Safe Participating In DeFi🦺 — Powered By The “Members Library”🔒
We have recently seen an influx of unsafe protocols and collapsing products but what can we use to avoid being on the receiving end of unfortunate events?
Safety in crypto is a topic we have covered before in a more generalised way where we discussed the importance of overall cyber and blockchain security however, how does one stay safe interacting with defi?
Muti-billion dollar ecosystems have been built upon defi giving opportunists the chance to facilitate large-scale exploits however what tools can we use at all levels to mitigate some of those risks?
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Introduction 🎬
You would have to be living under a literal rock to try and argue that safety in crypto hasn’t been questioned to stand the test of time. I agree with the perspective that there have been tighter protocols that are worth exploring but that shouldn’t come at the expense of a lack of safety.
Crypto’s recency allows for authorities to turn a blind eye as 99% of regulation is unclear and allows for rugs & hacks to occur without much repercussion. Not to mention there’s a whole north Korean hacking cybercrime group that is reportedly state-owned and trying to facilitate large-scale hacks so your safety should be at the forefront of your day-to-day on-chain activity.
In this article, I’ll be covering two defi safety tools that almost conduct risk assessments for protocols which can be useful to:
- Save Time
- Ensure Your Safety Matches Your Risk
In the conclusion, I’ll revisit the use cases for each tool.
RugDoc⛑
RocDoc is almost like a search engine with filters you can apply to allow you to browse through a range of chains/protocols and analyses the risk for you. There are many inner categories you can filter between like NFTs, Farms and Tokens to then analyse the risk.
As you can see there are different risk tolerances which if you are looking for let’s say a protocol to hold your $USDC, you would want the least risk possible and vice versa. Below you can find a useful graphic which you can also find on the website which explains each risk rating they use.
Additionally, you might’ve noticed that they also allow you to filter through Audited&KYC projects which if your criteria requires a protocol to be audited then RugDoc accommodates.
In my opinion, the best part about RugDoc is that when you open a project that fits your criteria in terms of chain & product, RugDoc has almost an incident report on the project with warnings and smart contract details.
They also analyse wallet behaviour for some top holders which is a big part of defi safety as if the big wallets are bad actors it can impact your safety in that protocol.
This is what I meant by risk report as you can see, it has some key information that you will want to know before interacting with your capital.
You Can Find RugDoc Here 👉 RugDoc⛑
DeFiSafety👨🔬
DeFiSafety is another safety tool that’s like a rating system for defi protocols and they cover 17 chains with over 260+ protocol reviews and they are trusted by some reputable names like Nexo, CoinGeko & DefiYield.😉
They give protocols a score based on their risk and they have pass/fail criteria in terms of their security ratings.
DeFiSafety give an overall safety score rating on a range of contributing factors that should be considered when interacting on-chain but we often ignore:
- Smart Contracts & Team
- Documentation
- Testing
- Security
- Admin Controls
- Oracles
Similar to RugDoc they also have security incidents where it tells you how many security breaches the protocol you are looking at has had.
Once you expand a project of your liking, there is a list of questions for each of those contributing factors which aggregates the way they conclude the final overall rating which is what they call the “scoring appendix”.
In my opinion, this is one of the most useful things I have come across in crypto and the fact that you can eliminate this process by using these tools, you will have more time to focus on more areas of research and due diligence that you may have more of an edge in.
Just speaking for myself I don’t want to spend my time researching the safety of a protocol when there are things that I am better at analysing so these sorts of tools are immensely valuable.
What’s The Point Of This🤷
Too many times we have been caught up with DeFi that is too risky in too many areas that we shouldn’t ignore. An example of that is the whole node season or the staking tokens that we shouldn’t go near and all of these can be solved through simple tools like these that take care of ALL the risk assets we SHOULD take before investing or interacting with something.
If we continue treating our crypto capital with less respect than fiat we will continue to lose it faster than fiat which defeats the purpose of everything we are trying to do in crypto.
I will certainly be using these tools when analysing or doing deep dives and I don’t want you guys to be confused about these tools.
Once again;
Save Time
Ensure Your Safety Matches Your Risk
1. You can save time because managing risk and carrying out all of the risk questions that DeFiSafety uses for example will be much harder to carry out yourself and it takes away from things that we should consider that contribute to a good investment.
2. Ensuring safety matches risk is also another one as in a risk-off environment that we are in currently, you will want your safety to align with that as well which RugDoc solves but also in a risk-on environment, you can consider extending the risk of your bets as the probabilities of profit are in your favour.
As a reminder, this is not a trading signal or investment advice; it is an opinion, and each trader/investor should know and understand the risks of trading cryptocurrencies. At no point should this be regarded as financial advice, feel free to familiarise yourself with our NFA disclaimer.
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