Are DeFi projects trustless?

[semobo]

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.

We gave away a huge amount of UNI for free. At first glance, yes. But nobody canceled the law of conservation of energy. If something has appeared somewhere, then, accordingly, someone has lost somewhere, or in this case, it is still ahead. It can not be any other way. So they don’t give anything for free, it’s someone who paid or will pay.

They created token and issued it for free so literally they made tokens out of thin air as well so no need for someone to pay random people on the internet, by doing this the free token got so much of value and almost half of the shares are in the hands of the project team so they made huge profits out of nothing and also made their trading platform into more people with this lucrative airdrop idea.

[ije07]

It's not that I don't believe it, it's just that I observe that the DEFI project is still young and in the last few months many DEFI projects have ended up scammers, although not all of them, but I personally still hesitate to invest in any DEFI project.

[Paycoinzzz]

Not all but most of the defi projects have been rugpulls. Many defi projects don't any clear visions and concrete plans how the those projects would be productive in crypto space. Scammers have exploited the opportunities they saw from YFI which recently reach to its new height so scammers dreams to have such kind of success as well and made their own defi projects then eventually turned out to be scams and left their investors crying.

you were right about the current state of affairs. Many people just rate the project as good or not based on its marketcap, but they don't know that behind it are scammers with A LOT of MONEY!
Crypto market is like a game of money, poor scammers and not good enough investment will die like everyone else. That is the harshness of the crypto market that I often talk about.

[peterpanda]

Nowadays people like to follow the trend.  Defi project is being discussed a little more.  I think this insanity is going to stop very soon.  These projects should be thoroughly analyzed before getting involved.

Precisely, before getting involved you need to make sure that you have a broader information about the project that you'll going to participated, there are lots of scammers who are riding with DeFi popularities without taking care you'll lose your investment in a short
span of time, best to make sure that you have everything before doing any participation.

Yes, that's what I meant.  It should not be allowed to float in our trend.  If you have to invest in a project, then it is important to have a good knowledge about that project.  But only time will tell how the Defi project will move forward in the future.

[Gvent]

Not all but most of the defi projects have been rugpulls. Many defi projects don't any clear visions and concrete plans how the those projects would be productive in crypto space. Scammers have exploited the opportunities they saw from YFI which recently reach to its new height so scammers dreams to have such kind of success as well and made their own defi projects then eventually turned out to be scams and left their investors crying.

this can be said about absolutely any project not only from the DEFI sphere
it is also worth remembering that as soon as a segment of the crypto market becomes popular and many investors enter it
 there are also many scammers who want to make easy money

[Viscore]

Not all but most of the defi projects have been rugpulls. Many defi projects don't any clear visions and concrete plans how the those projects would be productive in crypto space. Scammers have exploited the opportunities they saw from YFI which recently reach to its new height so scammers dreams to have such kind of success as well and made their own defi projects then eventually turned out to be scams and left their investors crying.

this can be said about absolutely any project not only from the DEFI sphere
it is also worth remembering that as soon as a segment of the crypto market becomes popular and many investors enter it
 there are also many scammers who want to make easy money

Scammers exist because they know that they can make money from innocent people who are new it the market. They can easily manipulate their minds, offer huge returns, and yeah, can be enticing. But not all of them succeed, I know that even newcomers are already aware of this kind of scheme, preventing them become prey to these scammers. If we are not supporting them nor allowing them to succeed, this a way to minimize their activities and brought them to an end.

[Yogee]

Decentralization is not so decentralized. This thought has a right to exist. Let us remember Vitalik Butterin with his tweet:

That is, at the beginning of its development, control over the project by the team is kind of normal to avoid any negative consequences from the outside community. But the gradual transition to full decentralization is interesting only for real projects, the same people who just want to earn money and go into the sunset will remain conditionally decentralized.

By the way, Uniswap has the same situation now, in fact, their project with the recently released token of centralized governance. Although there is a control system through a community, but everything is arranged in such a way that they simply will not have enough votes to make suggestions for changes in the protocol. But the team and investors have just enough. At the moment, we see in this project the power shift not towards the community, but as Uniswap itself claims, it was done for protocol security.

You can read it here: [Analysis] Uniswap and UNI really decentralized?

It's nice of Vitalik to acknowledge the fact that a level of centralization for Ethereum based projects is necessary to take matters under the team's control at the beginning. The problem is many of them don't disclose these facts to their community and straight out lie that they're decentralized until they are caught by third parties. I disagree that "Exit to community" is underrated. No matter how you look at it, the core team is still dumping minted tokens to the community [money out of thin air]. In a way, it's similar to a company selling shares of stocks except that they don't promise dividends or other returns.

I've read the Uniswap centralized governance in the same article I referenced in the post. It's one of the few DeFi's with no admin keys but there is still a level of control as you pointed out.

[beerlover]

For me DeFi is just another way how cryptocurrency can be accepted by people, especially people who don't understand cryptocurrency,
before DeFi exploded the concept of Decentralization already existed and many projects were using that concept, it's just that luck was in favor of new projects.
and we as capital owners must be wise when deciding to invest in the DeFi project, make sure not to follow the HYPE that is happening, and the decisions made are purely from our own research.

That is the trouble I have with defi that people do not seem to understand.
How could you trust a place that says they are decentralized in the name but they are not decentralized in the workings?

I mean if you check the defi structures of almost all defi coins you will see that they are not 100% decentralized which means by calling themselves defi they are lying to use because defi means decentralized finance whereas they are not decentralized.

Now they have already lied to you with just the code and name contradicting each other, how the hell do you think I would trust them with anything else? Obviously it is not going to be anything else that I could ever trust them, we are talking about something much bigger with the decentralized fake so nothing else could ever recover that.

[Amel]

Many individuals as of now REKT utilizing some DeFi. Much the same as a Ponzi plot as of late in our nation which very spreader all finished, it's called Forage. It's sort of a fraudulent business model which you should contribute first before you will begin to procure or you have to welcome first a few people and cause them to contribute before you to can begin to gain. Once the devs are done with their siphon and dump conspire and got heaps of cash in their pocket, they will exit quietly. This publicity topples the crown publicity however. Indeed, this is more similar to a quick in and out simply like when ICO was all the while ruling. I think putting resources into the long haul is exceptionally unsafe and it is better in the event that we want to consider putting resources into top coinmarketcap.

[Shallow]

In as much as I might not totally agree that DeFi is totally decentralized, but to an extent I will say the developers of those projects can still abuse their powers if care is not taken. To be frank, taking a look on most projects today claiming to be decentralized, you can hardly see any truth in their claims, they once in a while protary traces of centralization and since most people are already after profits they fails to ask the right questions. In my own opinion, the only coin which is completely decentralized is Bitcoin, in the case of Ethereum, I can say to a great extent it is decentralized but not 100%. Now if a major project like Ethereum can not be believed to be totally trustless, I think I have seen a post challenging the decentralization of Ethereum; then what more all these DeFi projects flying around?
Nevertheless, in my own simple opinion, I would say, be careful of the projects you invest in, if in doubt, remember that Bitcoin is the best to hold.

[lumeire]

I can say some projects are very good. But if you check all the recent defi projects then you will see a lot of dumping and pumping on the market. Its now looks like gambling to me to invest in any DeFi. But I like some DeFi like DIA, Chainlink and I think these are some gems within a lot of ordinary DeFi project. Some project is very good because of its real use case.

Most DeFi projects are just pump and dump coins, only a handful coins like the ones that are official coins of the decentralized exchanges are good ones to invest in, other is comp token which is really good one. Developers are rushing in to make money on the DeFi projects because of the fact that people are investing in these projects like crazy and without analysing the use case and also even when the project is not even having a Whitepaper.

[tvplus006]

For the entire DeFi sector, the correction of bitcoin is particularly dangerous, which is associated with a decrease in the price. In this case, when BTC loses 5% of its value, DeFi tokens can lose up to 50-70%. And if we are confident that the value of bitcoin will recover, then we do not have such confidence in relation to DeFi.

[chikator]

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.

I think rather it should be built on a foundation of trust. With something as not being able to know whats going on as an investor, i dont think anyone would get involved in it. All you can do with a blind eye is trust the team behind it, still pretty sketchy but what can i say.

[lixer]

It’s good that you create such awareness, people really need to open their eyes and make their DeFi choices wisely so they don’t end up investing in the wrong. Matters of security are things that shouldn’t be taken lightly, but as usual the team behind a project will never tell you that their security is poor, no matter how bad it is they will always claim to have the most advanced of security features.

It’s now up to the investors to look more into the project, and if there is anything that doesn’t seem right to you, it’s a sign that you should quit early, rather than continue and bear the consequences.

[zasad@]

If we talk about DeFi, then most of the projects that journalists attribute to the DeFi ecosystem are not decentralized.
The creators of these projects can block tokens at any address, create white and black lists.

The second problem is hamsters. They don’t study, they want to lose money.
They invest in a pool of liquidity and do not understand that if the price of one of the assets falls, they will lose money.
https://bitcointalk.org/index.php?topic=5276515

If you don't know what to invest in, check out the projects in which famous cryptocurrency funds invest, for example Andreessen Horowitz
https://a16z.com/portfolio/

In any developing industry, fraudsters come first, so before any investment you need to check everything.

[Crypto_lion]

The current state of DeFi and governance protocols aren't as trustless and decentralised as they claim to be. This is mainly because of the fact that a large part of governance tokens are allocated for the team (rightly so because of their work in creating the project). But this creates a scenario where the team has the ability to decide any decision they want to to make.

What do you guys think? How can we get around this problem ? One solution is vesting team tokens and that the team cannot vote for the decisions .

[Kelvinid]

It’s good that you create such awareness, people really need to open their eyes and make their DeFi choices wisely so they don’t end up investing in the wrong. Matters of security are things that shouldn’t be taken lightly, but as usual the team behind a project will never tell you that their security is poor, no matter how bad it is they will always claim to have the most advanced of security features.

And I presume that they all had learned the past when ICO projects did the hypes, the same thing that it happens to Defi which is some of them aren't then good for investment. We make choose of (some) Defi projects but it is necessary first to make research and avoid losses. We don't need to fall into hypes as many cases that it was only a clickbait that brought us into nothing. We need to be smart, think twice as possible, that is the only thing it helps.

[pandanaran]

yes, I personally will not easily trust the defi project in this forum. I saw some of them don't have real teams and I avoided them. I also agree with some of the points that you conveyed, at least it can open the eyes of project investors so they don't easily believe the hype of project defi, I mean minimizing the risk of loss early on by not investing money in the wrong place.

[Abiky]

you were right about the current state of affairs. Many people just rate the project as good or not based on its marketcap, but they don't know that behind it are scammers with A LOT of MONEY!
Crypto market is like a game of money, poor scammers and not good enough investment will die like everyone else. That is the harshness of the crypto market that I often talk about.

People are usually following the money, instead of a project's real use cases for the mainstream world. No matter which "De-Fi" platform it is, if the same has attractive interest rates, it'll gather the attention of the general public. That's the way it works. Sadly, this leads to many undesired losses due to most "De-Fi" projects turning into a scam in the long run. As long as the platform's creator has access to his/her "admin keys" he/she can do whatever he/she wants with your funds. A true "De-Fi" platform needs to be trustless in order to work as intended. Thankfully, it's possible to know if a "De-Fi" project is as trustless as their creators claim it to be by checking the source code. If we didn't have such ability, the community wouldn't had a way to know which projects are legitimate and which are not.

In the end, "De-Fi" will turn out to be speculative grounds than a serious alternative to traditional banking. Unless legitimate projects overcome illegitimate ones, I don't see the industry going anywhere. Most people don't care about decentralization as long as they're able to fill their pockets with money. Because of this, scams will continue to appear like there's no tomorrow. And there may be nothing we can do to stop them. Just my thoughts

[slashz9]

some project definitions are good and have been around for a long time such as chainlink, band, and several others.
while the new one was released when Fomo defi went up I was not sure and doubted it because this was like hype and could disappear at any time.
but it's also a quick way to make a profit just make sure you throw it away when you make a profit.