Why do people invest in DeFi tokens with unaudited smart contracts?

[mexite]

Decentralized finance, DeFi, has grown exponentially in the past few months. The promise of high rewards is one of the selling points that attract investors to purchase new tokens. Unfortunately many of these tokens are mere social experiments without proper security audit of their smart contracts. The presence of bugs and vulnerabilities such as unlimited mint functions, bear huge risk not only to the sustainability of the project but also to investor's investments.

We have seen in recent several instances of losses due to defective smart contracts. YAM finance,, Soft Yearnn finance (SYFI), are some of the examples of DeFi projects that failed or exited due to unaudited smart contracts.

So why do investors take such a huge risk despite these bad experiences to still invest in new crypto projects smart contract audit carried out by a reputable third-party security firm? Are they not scared of loss of their money?

[logfiles]

Some people just do it out of ignorance, greed or FOMO. Just because they have seen one successful DeFi project they think any other DeFi project they come across will be successful as well. For example all the copycat projects you listed above came into existence as a result of Yearn Finance's success so ignorant people usually fall for them.

[TheUltraElite]

I would give a lot of importance to craze and hype that surrounds all these names. One project doing good leads to a lot of similar projects coming up but the truth is that they are copying and less likely to get anything good in terms of development. But what they get is fundraising and many investors will join in to support the next project with a similar name because they care about the way to make money and not the long term goal.

So they join the hype even if their contract is unaudited which would mean possible bugs and exploits still exist. Or it could be a reverse scamming method used by the owners to raise money and then hack their own code and show that they have been robbed. You cant trust anybody.

In fact other than bitcoin, everything else in this sector is a short term gain vision. Long term has gone back to traditional markets where you have legit companies running legit projects at least making some real earnings.

[shinratensei_]

So why do investors take such a huge risk despite these bad experiences to still invest in new crypto projects smart contract audit carried out by a reputable third-party security firm? Are they not scared of loss of their money?

They were trying to get quick bucks especially the private sale participants. They were thinking after being listed on the exchange site and their money will be turned into the 10x or even 100x
that makes them all tried to bet on the a scam project with unaudited contract.
In fact if this is happening so many times. Most of these people didn't know how to evaluate the contract and they were only following the waves.
They were getting scammed by the scam project so many times.

[Shallow]

Decentralized finance, DeFi, has grown exponentially in the past few months. The promise of high rewards is one of the selling points that attract investors to purchase new tokens. Unfortunately many of these tokens are mere social experiments without proper security audit of their smart contracts. The presence of bugs and vulnerabilities such as unlimited mint functions, bear huge risk not only to the sustainability of the project but also to investor's investments.

We have seen in recent several instances of losses due to defective smart contracts. YAM finance,, Soft Yearnn finance (SYFI), are some of the examples of DeFi projects that failed or exited due to unaudited smart contracts.

So why do investors take such a huge risk despite these bad experiences to still invest in new crypto projects smart contract audit carried out by a reputable third-party security firm? Are they not scared of loss of their money?

"Social experiment" that is just what those projects are and since that is true, it will be a huge task to expect anything good from them, because the team aren't ready for such but only ready to fill their pockets in any way possible and as quick as possible. If a project is actually worthwhile, and the team having a long term vision, they will first set things in place in order to build a good foundation for their projects, but once a project isn't able to even carry out an audit on their smart contracts means something is wrong.
Now on the part of people who invest in these projects, they do so because of hype; remember DeFi came with hype, and it was on this hype that many projects were based on, and in the same way, many people were caught in the web of hype that they failed to carry out the neccessary research. Additionally, with hype comes the urge to make quick gains, and as such wherein a very few were lucky to make gains some weren't.

[cabron]

The one that is very much transparent including their audited smartcontract I believe is the Uniswap. So far most of the Defi project aren't audited including that YFI but because we want to profit anyway.  Like they said its all about experiment for now and those who are willing to risk, will risk their money. Defi provides good rewards for the risk takers though.

[batang_bitcoin]

So why do investors take such a huge risk despite these bad experiences to still invest in new crypto projects smart contract audit carried out by a reputable third-party security firm? Are they not scared of loss of their money?

In the technical aspect, they probably don't know about those things. All they care is about the profit that they can get potentially if they start investing to those finance projects. Ever heard of FOMO? that's what mostly do when there's something new that came out and it's giving everyone the opportunity to invest. They don't look at the technical sides and as long as someone has been heard and profited on it already, they'll come and go. The same craze during ico.

[rat03gopoh]

DeFi Hype season, anything can think of after. No need to know the project background and its potential in detail. As long as people talked about it a lot, the defi project would definitely produce results. Anyone can assume that of the many people who are enthusiastic about a defi project, some of them must have done research.

[CryptoYar]

So why do investors take such a huge risk despite these bad experiences to still invest in new crypto projects smart contract audit carried out by a reputable third-party security firm? Are they not scared of loss of their money?

Of course, this is a lack of knowledge and greed of money. If they know what mistake they are doing, then do not invest in such projects at all.
Sadly, new investors have been told to buy DeFi if they want to get rich, and they start buying them without thinking. While many projects haven't revealed thier core team

[Akiko]

Some people just do it out of ignorance, greed or FOMO. Just because they have seen one successful DeFi project they think any other DeFi project they come across will be successful as well. For example all the copycat projects you listed above came into existence as a result of Yearn Finance's success so ignorant people usually fall for them.

They are blind to possible income they can get investing in a project. They are thinking this new defi project will make them millionaire or give them a lot of profit because of the profit of others get from investing in defi .

Other investors also doesn't have idea how to review a contract before investing they are just investing in a new project because of greed.

[dunfida]

So why do investors take such a huge risk despite these bad experiences to still invest in new crypto projects smart contract audit carried out by a reputable third-party security firm? Are they not scared of loss of their money?

Simply that they dont like for them to miss the train and its expected that there would be lots of people will be just throwing off their money when theres hype because the probability on making profits is huge
and they wont really realize the mistakes that they had done if they wont able to experience losses due to failed project or do become scam.Its no denial that DeFi did really make some hit or trend into this market
but it didnt really sustain that long and everything turns out to be flooded by the same projects all over again just like what happened when ICO was still in the spot.It is not different and as anticipated
majority of those investors did really lose up money specially to late comers because they do believe that they arent late to the party.

[TheUltraElite]

DeFi Hype season, anything can think of after. No need to know the project background and its potential in detail. As long as people talked about it a lot, the defi project would definitely produce results. Anyone can assume that of the many people who are enthusiastic about a defi project, some of them must have done research.

A lot of unscrupulous PR goes into it too. Nobody to regulate it or put up fines on companies for predatory tactics unlike in the fiat based system. It has been one of the bad things in this sector but you can avoid it if you are keeping your focus only on bitcoin and no other shitcoin and follow this policy strictly.

But for those who are looking to make some quick cash they will go for shady projects like all the DeFi projects coming up and thus hype it all up to a point where they can sell and exit the scheme nicely and the newer investors are stuck.

The only way to end this is to stop going for anything that gets hyped.

[slaman29]

See the problem with audits is that 1) even if they are audited, the regular use, like me included, won't know the quality or depth of those audits. I don't know coding at all. How will I know how good the audit was. 2) Even if all was good, audits don't look at what is unknown, only what is known. New hacks and new malicious codes are always found.

It's like the IEO days. So what is projects were vetted by Binance or Bittrex? They ended up being shit anyway:)

[asriloni]

DeFi Hype season, anything can think of after. No need to know the project background and its potential in detail. As long as people talked about it a lot, the defi project would definitely produce results. Anyone can assume that of the many people who are enthusiastic about a defi project, some of them must have done research.

They only care about the return after the coin being listed on the uniswap. There are so many scam defi and these scam defi projects have been running away with all of money that owned by the investors.
People are not feeling enthusiast with the project but they are only feeling interested with the ROI that they can expect to happen when they are investing on the defi projects.

[TheUltraElite]

It's like the IEO days. So what is projects were vetted by Binance or Bittrex? They ended up being shit anyway:)

A good observation indeed.

IEOs used the tagline "we are launching on this exchange" - as if being launched there would mean they are legit and are going to become huge. Some exchanges even started something called "launchpad" - all this "launching" made me laugh hard at the basic lacking in each and every crypto project that is intrinsic market making method or demand.

Unless you can create a market for that token where it can be used to deliver some service which no other token can, you are basically doomed in this sector.

Audit or no audit, the final product or its implementation does not depend on auditing. Auditing checked out some flaws or possible exploits but that is only one part of a big game.