Decentralized Finance (DeFi) is one of the most talked-about aspects of the cryptocurrency industry today. The sector has seen tremendous growth, with new projects and applications emerging almost daily.
However, as the DeFi space expands, so do the scams. An analysis by BanklessTimes.com reveals that more than 10% of all the DeFi tokens in the market are fraudulent. To be precise, 183,265 tokens in the DeFi protocols are a scam.
Speaking on the data, the CEO of BanklessTimes, Jonathan Merry, said, “DeFi presents several profitable opportunities through its various loans and trading platforms.
“Yet, with each new crypto trend that attracts considerable profits, scammers are always seeking ways to capitalize on it. It is no surprise that 10% of tokens in the protocol are scams. It calls for caution among users.”
Merry added, “Some popular types of scams include rug pull, Ponzi schemes, pump-and-dump schemes, and exit scams.
“As the DeFi space continues to grow, so does the need for proper regulation. Several regulatory bodies, such as the SEC and CFTC in the US, are already working on developing policies that will safeguard investors from fraudsters.”
Regulator’s Role in Reducing Scams
The regulatory community responds with various measures to cut and thwart DeFi fraud. The Biden Administration has urged clear control of cryptos and blockchain-based economies. The measure aims to reduce digital asset abuse and fraud.
Two US senators presented bipartisan legislation in June 2022 to create a regulatory framework for crypto markets. The bill encouraged responsible financial innovation, flexibility, openness, and comprehensive consumer safeguards. Moreover, the bill categorized most digital assets as commodities, giving the CFTC power over digital assets’ spot markets. Coinbase, Kraken, and the Crypto Council for Innovation endorse the bill.
Despite the existence of scammers in DeFi protocols, you can remain safe by exploring the following techniques.
Keep your funds and tokens safe in a Secret Token Wallet
If you are holding Secret Tokens or Secret NFTs in a Secret Network wallet, you can choose who can access your funds. This safeguards your blockchain assets from exposure to potential phishing attempts.
Make sure to regenerate your viewing keys routinely
The benefit of viewing keys is that you can grant others temporary read-only access to your financial records. However, this poses the danger of allowing too many individuals access to your money, even after this access is no longer required.
That is why it is essential to refresh your viewing keys constantly. Once you generate a new set of keys, the previous set’s holders will no longer be able to access the funds.