Are DeFi projects trustless?

[Yogee]

They should be since it's Decentralized Finance.

Ratimov had a topic on this and if you haven't seen it yet, visit https://bitcointalk.org/index.php?topic=5275538.0

In that topic, DeFi was defined as:

Decentralized Finance (DeFi) is a decentralized, open source and ecosystem of financial applications, which does not require trust  / services based on public blockchains, predominantly Ethereum. The DeFi ecosystem encompasses all aspects of financial services and transactions, including lending, lending, and trading within decentralized structures. Any Internet user can interact with the ecosystem and manage assets through peer-to-peer (P2P) and decentralized applications (dApps).

However, DeFi Watch recently reported that majority of top DeFi projects today isn't as decentralized as they seem. You are probably aware that most of them are controlled by a few individuals or what we call as the "core team" but do you know that they can change the codes without the community consent? They can even adjust or compromise a user's deposit balance if they want to. It's possible for them to do all of that since they have the "admin keys" to control the smart contract.

Admin keys in most of these DeFi projects are protected with timelocks and multi-signatures for security and to try to make it look more decentralized.
- Timelocks delays the implementation of upgrades, code changes, or transactions made by developers. This allows the community to review what the team is doing before it takes effect. In cases of hacks, the time lock allows developers to block or invalidate malicious codes.  
- Multi-Sig means it takes more than one key to sign and authorize transactions.

The problem is how do we know the level of security of these admin keys? Access to them is limited to a few people so we won't. The core team can only say it's highly secured but we cannot verify that. What we can only do right now is to trust what these core team claims. Some of them are even anonymous  

If you want list of projects in the report, here are your must read articles:
- https://defiwatch.net/admin-key-config-and-opsec/what-is-admin-key-risk (Watch the video)
- https://cointelegraph.com/news/how-many-defi-projects-still-have-god-mode-admin-keys-more-than-you-think


P.S.
This post is not to discourage anyone to look into DeFi projects but to try to educate everyone of things they are not probably aware of. As we all know, it's easy to get caught up in the hype and invest immediately without looking into technical details.

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[hatshepsut93]

It's only a matter of time until some DeFi developers will start abusing their admin keys privilege to scam people, this field is ripe for that - tons of investors blindly throwing their money in anything "DeFi", just like it was with ICO and blockchain in 2017. Anyone who is playing on this market right now needs to understand that sooner or later the hype will be gone, and when that happens, a crash will come.

[lepbagong]

It's only a matter of time until some DeFi developers will start abusing their admin keys privilege to scam people, this field is ripe for that - tons of investors blindly throwing their money in anything "DeFi", just like it was with ICO and blockchain in 2017. Anyone who is playing on this market right now needs to understand that sooner or later the hype will be gone, and when that happens, a crash will come.

yes, any system that people will create if they are behind it which makes goals only for profit and deceit, then everything will end up empty. it's no different like when ICO started and it's very popular but when those people start doing things that are not praiseworthy it ends up messing up, I believe the same as the current defi. to be careful in a way that is not wise in every new system there must be something that is not praiseworthy.

[$crypto$]

It's only a matter of time until some DeFi developers will start abusing their admin keys privilege to scam people, this field is ripe for that - tons of investors blindly throwing their money in anything "DeFi", just like it was with ICO and blockchain in 2017. Anyone who is playing on this market right now needs to understand that sooner or later the hype will be gone, and when that happens, a crash will come.

yes, any system that people will create if they are behind it which makes goals only for profit and deceit, then everything will end up empty. it's no different like when ICO started and it's very popular but when those people start doing things that are not praiseworthy it ends up messing up, I believe the same as the current defi. to be careful in a way that is not wise in every new system there must be something that is not praiseworthy.

There must be a trend season every year, the first I know ICO in 2017, many people were deceived by the success happened at the first ICO after that success ran many people got stuck in ICO in 2018 fraud occurred where scamer took advantage of it I know this will risky at the end.
Then the second IEO appeared in 2019-2020, IEO sales were successful involving a lot of large exchanges and in the end it was successful too, but now it is difficult for large exchanges to accept projects because most of them are only able to pay low exchanges and at the end of the token becomes shitcoin after entering low exchange, this is screwing too.
So now DeFi must know when to take advantage of DeFi benefits, I am also sure that the hype that happened to DeFi will be destroyed too.

[GreatArkansas]

It's only a matter of time until some DeFi developers will start abusing their admin keys privilege to scam people, this field is ripe for that - tons of investors blindly throwing their money in anything "DeFi", just like it was with ICO and blockchain in 2017. Anyone who is playing on this market right now needs to understand that sooner or later the hype will be gone, and when that happens, a crash will come.

They started to use DeFi to scam people. A lot of people already REKT using some DeFi. Just like a ponzi scheme recently in our country which extremely spreaded all over, it's called Forsage. It's kinda a pyramid scheme which you will need to invest first before you will start to earn or you need to invite first some people and make them to invest before you can start to earn.
These kinds of projects are destroying the ecosystem or image of Decentralized Finance (DeFi).

[SquirrelJulietGarden]

Please look at Define the (scam) DeFi. People show little attention on my topic but if you are patient to read my topic and have some sort of cautious on scam projects, you can find some similarities between DeFi projects and stake/ masternode projects.

Instead of running network on proof of stake algorithms, DeFi projects are run on ETH network with smart contract. You brought a good point that smart contract is controlled by key that is hold by developers.

SUSHI project is a very valuable lesson on how developers can abuse DeFi projects. The refund later of developer does not make sense. Scam attempt is never good for one project.
https://coinpedia.org/news/sushi-dumped-still-a-good-gain-option/

Centralization, it is but people are misled and their eyes are blurred or blinded by profits.

[Kunnu]

In my point of view defi projects are mostly a kind of pump and dump projects this is what I have seen so far after see the performance of lots of defi projects, I understand there are some defi projects which is quite profitable so far but it's not mean I should praise them anyways I don't have much expectations with defi I only take them as a temporary opportunity.

[Beparanf]

In my point of view defi projects are mostly a kind of pump and dump projects this is what I have seen so far after see the performance of lots of defi projects, I understand there are some defi projects which is quite profitable so far but it's not mean I should praise them anyways I don't have much expectations with defi I only take them as a temporary opportunity.

There are DeFi projects that are still useful like Serum, Chainlink and other that have specific goal or purpose in the community, though those who are not really useful still got momentum to be notice and succeed sure to DeFi popularity and hype that we can take advantage in short term.

[Gumbo88]

I think those are Yam, Hakka. After ICO the price go down so much. I think Defi just a short trend.

[Twinkledoe]

In my point of view defi projects are mostly a kind of pump and dump projects this is what I have seen so far after see the performance of lots of defi projects, I understand there are some defi projects which is quite profitable so far but it's not mean I should praise them anyways I don't have much expectations with defi I only take them as a temporary opportunity.

There are DeFi projects that are still useful like Serum, Chainlink and other that have specific goal or purpose in the community, though those who are not really useful still got momentum to be notice and succeed sure to DeFi popularity and hype that we can take advantage in short term.

A lot of people will get screwed by these DeFis if they will not be careful on investing these projects. Though I believe there are few of them that are sincere like the Chainlink you mentioned, but most of them will die in the next few months. Once the devs are finished with their pump and dump scheme and got loads of money in their pocket, they will exit silently. This hype overthrows the corona-hype though.

[LogitechMouse]

Generalizing the DeFi projects useless is inappropriate.

This is like when ICO hype is at its highest. There are still some DeFi projects that are trusted. Its just that they are being covered by this scam DeFi projects. My advise to the newbie investors out there is to not to invest at this moment in DeFi projects unless you know when to entry and when to exit (I call it hit and run ). Don't buy these tokens and hold for mid to long term hoping that it will be a successful one. Right now DeFi projects is being swarmed by these scammers who are trying to scam you guys.

[Yogee]

It's only a matter of time until some DeFi developers will start abusing their admin keys privilege to scam people, this field is ripe for that - tons of investors blindly throwing their money in anything "DeFi", just like it was with ICO and blockchain in 2017.....

Some of them already abused their privilege. Sushi was the first one if I am not mistaken but the developer returned the $14 Million to the treasury after some community pressure and fear of jail time. Yfdexf was another one that exit scammed with $20 Million.

The top DeFi projects which was reviewed in the post will less likely scam compared to newer projects since timelocks and multi-sigs are in place but stay cautious. If you are just an investor and understand little about how these codes and security measures works, you'll probably be the last to exit when shit happens to projects you poured your money into.

[amishmanish]

The DeFi trend is a mockery of the tenets of trustlessness and decentralization as was propagated by bitcoin. Most of them depend on setting up a website that has an instance of a DEX running on imaginary tokens of the protocol itself. The concept of a DEX or Decentralized Exchange is nothing new. It has been there since the time that people wanted to trade BTC.
The concept of listing your own tokens/ assets had already been explored by Bitshares, Ardor etc.

The main feature is the ability to create and earn fees from a liquidity pool. It is like a public owned exchange where the liquidity providers benefit from the fees. There is value in that because it is allowing people to trade on a non-KYC basis without caring about lack of liquidity. The whales who created these Liquidity pools to benefit from the fees were not saitsfied with the return. This is when the whole hype of "Governance tokens" has started. Now everyone is out peddling their own token for governance, staking, shitting and pissing. That is the problem. Everyone wanted to be bitcoin. Now everyone wants to be Uniswap, Curve or YFI. This is when the scams start in the name of the latest buzzword. Back in 2017, "Blockchain" was the buzzword. Now it is DeFi.

In the process, they are DeFiling one of the most promising opportunities of crypto.

[onecall123]

A lot of people will get screwed by these DeFis if they will not be careful on investing these projects. Though I believe there are few of them that are sincere like the Chainlink you mentioned, but most of them will die in the next few months. Once the devs are finished with their pump and dump scheme and got loads of money in their pocket, they will exit silently. This hype overthrows the corona-hype though.

Yes, this is more like a hit and run just like when ICO was still dominating. I think investing in the long term is very risky and it is better if we prefer to consider investing in top coinmarketcap. I hope people are much more careful because the flow like this is the same as before, the late entry and exit will lose a lot

There's actually mix feedback from the community. It's OK until you're making money by trading on the DeFi hype. Primary concern is how we're utilizing the tech. As UNI gave us a huge amount of money for free. Here, I do trust UNI it has a very promising future, assuming it's a strong team developing it and a solid coin.

[Warkop]

A lot of people will get screwed by these DeFis if they will not be careful on investing these projects. Though I believe there are few of them that are sincere like the Chainlink you mentioned, but most of them will die in the next few months. Once the devs are finished with their pump and dump scheme and got loads of money in their pocket, they will exit silently. This hype overthrows the corona-hype though.

Yes, this is more like a hit and run just like when ICO was still dominating. I think investing in the long term is very risky and it is better if we prefer to consider investing in top coinmarketcap. I hope people are much more careful because the flow like this is the same as before, the late entry and exit will lose a lot

There's actually mix feedback from the community. It's OK until you're making money by trading on the DeFi hype. Primary concern is how we're utilizing the tech. As UNI gave us a huge amount of money for free. Here, I do trust UNI it has a very promising future, assuming it's a strong team developing it and a solid coin.

Yes, UNI has given some money for free and UNI looks very good in the future, but are you sure UNI will be a promising long-term investment in the future? I have no bad intentions about UNI but I am just asking about what you say, because there have been many projects like this and give away their coins for free but in some time the coins they manage will be bad in the future, I just assume because I just want to looking for the best for long term investment.

[Paycoinzzz]

Thanks for a very meaningful post, I realize there are a lot of people who don't understand Defi but they still invest a lot of money. After encountering many scam projects, they complained to their fate and blamed the market for not being fair to them. This is an article to help new investors not make the same mistakes as those greedy.
Recently, I also see many projects that are not considered Defi but they still stick with Defi label to attract more capital, what do you think about this issue?

[3meek]

I think those are Yam, Hakka. After ICO the price go down so much. I think Defi just a short trend.

Why do you say that DeFi is just a short trend? do you have a more complete explanation about this DeFi thing? because most people today already believe in the DeFi trend and will continue to do so for the next year.

The DeFi phenomenon is a very cool innovation in the world of cryptocurrency and financial systems in general! However, many scam projects and lack of regulation can ruin this system... That's why they say about a short-term trend and a hype, like ICO 2017...

[slackovic]

I think those are Yam, Hakka. After ICO the price go down so much. I think Defi just a short trend.

Why do you say that DeFi is just a short trend? do you have a more complete explanation about this DeFi thing? because most people today already believe in the DeFi trend and will continue to do so for the next year.

I'm pretty sure that DeFi is not a short trend. It will continue, but only few best projects will remain. For example, Synthetix is one of the DeFi pioneers. They are working on the project since two years ago when the word DeFi wasn't around.

The DeFi phenomenon itself is a very cool innovation in the world of cryptocurrency and financial systems in general! However, many scam projects and lack of regulation can ruin this system... That's why they say about a short-term trend and a hype, like ICO 2017...

There were many scam ICOa back in the 2017. and that didn't make all ICO projects fail. Some of them are still very successful projects.

[Renampun]

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The DeFi phenomenon is a very cool innovation in the world of cryptocurrency and financial systems in general! However, many scam projects and lack of regulation can ruin this system... That's why they say about a short-term trend and a hype, like ICO 2017...

That's right, the DeFi phenomenon is beyond expectations...
This DeFi HYPE moment will definitely be used by everyone, including the con artists. must be careful in making decisions when want to invest in one of the DeFi tokens, do not get stuck with HYPE because it is very detrimental.

[ilovealtcoins]

Most of the projects impersonated the DEFI and raised funds and disappeared. Some DEFI projects have ridiculously high returns.
People still praise DEFI but I will observe them. Time will tell which DEFI model is best and which projects will exist in the future.
People do farming just to earn project tokens and sell them. The benefits of holding tokens are few. YFI has mined 30,000 tokens. A large number of investors have left and switched to other projects.