Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Taming And Managing The Financial Risks Of The 'Wild West'

By Daniel BeurtheCryptocurrencyJun 20, 2022 11:08
uk.investing.com/analysis/taming-and-managing-the-financial-risks-of-the-wild-west-200523398
Taming And Managing The Financial Risks Of The 'Wild West'
By Daniel Beurthe   |  Jun 20, 2022 11:08
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Over the last few years, decentralised finance (DeFi) has skyrocketed in popularity and caught the attention of many; bridging the transition of users from Web2 to Web3.

According to research done by Fortune Business Insights, the global cryptocurrency market experienced growth of 10% in 2020 ($826.6 million), in comparison to the year-on-year growth between the years 2017 and 2019. It is estimated that the market will grow from a total of $910.3 million in 2021 to $1902.5 million in 2028 at a compound annual growth rate (CAGR) of 11.1% in that period of time.

Evidently, DeFi is taking the world by storm and it is not slowing down anytime soon. With more and more people joining the space and trading cryptocurrencies, there has been an increased number of traders dabbling in decentralised exchanges (DEXs) such as Uniswap, PancakeSwap, and Swapsicle.

DEXs are undoubtedly the future of DeFi as they bring a whole new aspect to the industry to facilitate the trading of cryptocurrencies in order to create liquidity. In comparison to centralised exchanges (CEXs), DEXs offer enhanced privacy, personal monetary sovereignty, and even added security. However, a DEX also comes with its fair share of security risks which can be daunting to many, further broadening the gap and slowing down the mass adoption of DEX users.

Most recently, Osmosis a blockchain and DEX platform fell victim to a $5 million exploit, draining its liquidity pools. Similarly, in March of 2021, DODO DEX faced a crisis when it was drained of $3.8 million.

So why are DEXs more vulnerable to getting hacked in comparison to CEXs despite the mass adoption of DeFi? Let’s dive right into it:

Re-Entry Vulnerability

Let’s take a look at the Lendf.Me and Uniswap attack. Uniswap was attacked through the re-entry vulnerability tactic. A re-entry vulnerability attack occurs when a smart contract initiates a call to an outside contract, and an external contract then calls back all in a single transaction. Unfortunately, this means a hacker can potentially control the smart contract, and drain the funds of the liquidity pool.

Flash Loan Attack

A flash loan attack refers to the exploitation of a smart contract when a hacker takes out a flash loan and then uses the capital that they’ve borrowed and pays it back in the same transaction. A notable example of this is BurgerSwap’s unfortunate flash loan attack that saw attackers make off with approximately $7.2 million of altcoins.

Phishing

Unfortunately, plenty fall victim to phishing attacks. A phishing attack is when a hacker tricks a user into providing their key wallet details including private keys and seed phrases. Oftentimes, hackers compromise legitimate websites providing gateways into a DEX to acquire such vital details from traders. A notable example of this is the 2021 phishing attack that used PancakeSwap and Cream domains to acquire funds.

Rug Pulls

Rug pulls are when development teams decide to abandon a project and sell or remove all its liquidity, the latter being more likely. In 2020, Sushiswap lost over $13 million because of a rug pull occurrence. Fortunately, the founder, known as Chef Nomi, withdrew the funds in the first place, and later on, returned them. However, that is not necessarily the case for everyone.

Due Diligence

Like all things, when you have risks, you also have ways to avoid falling victim to them. Whilst it is important to stay vigilant and keep up with the news and latest updates with regards to a DEX you choose, it is as important to pick a DEX that carries out its very own due diligence in order to keep its community safe.

Fortunately, that is exactly what the newest, cutting-edge DEX plans to do! Say hello to Swapsicle.

Swapsicle

Swapsicle is a “for you by you” community-driven DEX on the Avalanche blockchain —but due to being interoperable in future— that is looking to give back to retail investors by offering a transparent, fully-doxxed team that is dedicated to bringing not just real utility, but far more utility than competitors in the space.

Screening

The team at Swapsicle has expressed their appreciation for people’s concern with regard to the risks that come with using a DEX, and thus, they propose to hold the solution to this anxiety. Swapsicle intends on screening projects that are looking to come on board and will not work with any questionable projects.

Feedback Loops

Furthermore, Swapsicle is dedicated to creating ecosystem partnerships with projects that list on the exchange in order to not only better serve the projects, but also protect the community’s best interest. The establishment of this customer service approach is exceptional!

Complete Team Transparency

The team at Swapsicle also intends on becoming completely accessible to the community. They are in no sense anonymous, and actively work in the field offering ready-to-meet, like-minded individuals. Based in London, the team operates like a traditional business and is committed to the long-term success of Swapsicle whilst being in direct contact with users.

Final Thoughts

Decentralised exchanges hold the keys to infinite opportunities to leverage the powers of DeFi even further to continue growing one’s pot of wealth. However, we must be mindful of what we get ourselves into and remember, “if it’s too good to be true, it’s likely too good to be true.” Projects such as Swapsicle are a great example of a DEX that is looking to do more than just create an exchange for traders and speculators alike to take advantage of the liquidity; it is an evergreen project looking to take its community to the next level by taking care of the community’s best interests. With its commitment to due diligence, transparency, and accessibility, Swapsicle is most definitely in the running to take over the DEX race as well as win over CEXs users.

Taming And Managing The Financial Risks Of The 'Wild West'
 

Related Articles

Taming And Managing The Financial Risks Of The 'Wild West'

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email