DeFi risk is not one thing. It is a stack of technical, economic, governance, liquidity, and operational dependencies. The goal is not to find a risk-free protocol, but to understand what can fail, how losses propagate, and whether the compensation is worth the exposure.
Reading Path
- Assessing risk in decentralized finance is the main framework for evaluating protocol risk.
- Risk? Yes please, but exactly how I like it introduces structured exposure and tranching.
- The Great DeFi Filter helps separate durable protocols from fragile noise.
- Unstoppable DeFi focuses on resilience and credible decentralization.
- DeFi’s UX Disaster looks at curation and user-facing risk.
- DeFi Bullshit Detector gives a practical lens for identifying weak claims.
Risk Checklist
- Contract risk: audits, upgradeability, admin keys, bug bounties, and dependency contracts.
- Oracle risk: price source quality, update cadence, manipulation resistance, and fallback behavior.
- Collateral risk: liquidity, volatility, token permissions, bridge exposure, and centralization.
- Liquidation risk: market depth, keeper competition, bad debt, and cascading failures.
- Governance risk: multisigs, timelocks, quorum, capture, delegation, and emergency powers.
- User risk: approvals, phishing, wrong network, leverage, and position monitoring.
Core Concepts
- Smart contract, audit, and bug bounty cover code risk.
- Price oracle, liquidation, and liquidation cascade cover market mechanics.
- Multisig, timelock, and governance attack cover control risk.
- Bridge, exploit, and rug pull cover common failure paths.
