Use Decentralized Finance (DeFi) Carefully
- What is DeFi?: DeFi refers to a set of financial services built on blockchain technology (such as lending, borrowing, trading, etc.) that are decentralized and do not rely on intermediaries like banks.
- Use DeFi protocols cautiously: DeFi can offer high returns, but it comes with unique risks such as smart contract bugs, hacks, or regulatory issues. Always review the code (if possible) or use trusted platforms with a proven track record.
- Understand liquidity and slippage: When engaging with decentralized exchanges or liquidity pools, understand how slippage (the difference between expected and actual price) and liquidity (how easily an asset can be traded without affecting the price) can impact your trades.
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