Farcaster

Challenges and Risks

While DeFi offers many advantages, it also comes with risks:

Smart Contract Vulnerabilities: Bugs or exploits in smart contracts can lead to significant losses (e.g., the $600M Poly Network hack).

Regulatory Uncertainty: Governments are still figuring out how to regulate DeFi, which could lead to restrictions or bans in certain jurisdictions.

Volatility: Crypto assets are highly volatile, which can impact the stability of DeFi platforms.

User Error: Since DeFi is non-custodial, users are responsible for their own security. Mistakes like losing private keys or sending funds to the wrong address can result in irreversible losses.