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hen trading cryptocurrency or NFTs, it is important to know that your funds are safe. Unfortunately, history has taught us that not all DeFi offerings are what they seem and the space is no stranger to scammers who will take your money. To help you trade safely, this article will teach you how to know if a DeFi platform is safe. Keep reading to learn more.

Key features of decentralization

When a platform is decentralized, it means that there is no central authority controlling it. This makes it resistant to censorship and less likely to be subject to fraud or manipulation. When you are using a decentralized platform, you own your data and no one can take that away from you.

Before learning how to know if a platform is safe, its important to understand the key features of decentralized platforms.

Permissionless:

A key feature of DeFi platforms is that they are permissionless, meaning that anyone can use them. This is in contrast to traditional financial institutions which often require customers to undergo a lengthy KYC process before they can use the platform.

Open source:

Another key feature of DeFi platforms is that they are usually open source, meaning that their code is available for anyone to audit. This allows the community to check for bugs and vulnerabilities and helps to ensure that the platform is safe to use.

What to look for when choosing a DeFi platform

Now that you know what features to look for in a decentralized platform, let's take a look at some of the specific things you should consider when choosing a DeFi platform.

Security

One of the most important things to consider when choosing a DeFi platform is security. Make sure to check whether the platform has been audited by a reputable third party and that it uses industry-standard security practices such as two-factor authentication.

Transparency

Another important thing to look for in a DeFi platform is transparency. The platform should be open about its fees, how it uses customer funds, and any other relevant information. You should also make sure that the platform's code is available for anyone to review.

Liquidity

When choosing a DeFi platform, you should also make sure to check its liquidity. This refers to the amount of money that is being traded on the platform and is an important indicator of its health. The higher the liquidity, the more likely it is that you will be able to sell your assets when you want to.

Signs of fraud

When choosing a DeFi platform, it's also important to be on the lookout for signs of fraud. Some red flags to watch out for include platforms that promise guaranteed returns or that require you to send them your private keys. If something sounds too good to be true, it probably is.

Signs of a fake exchange

Another thing to watch out for is fake exchanges. These are websites that masquerade as legitimate exchanges in order to steal your personal information or your money. To avoid falling victim to a fake exchange, make sure to do your research and only use exchanges that have been recommended by a trusted source.

How to keep your funds safe when trading crypto

In addition to choosing a safe DeFi platform, there are also some things you can do to keep your funds safe when trading crypto.

First, make sure to use a strong password and enable two-factor authentication on your account. This will help to protect your account from being hacked.

Second, always withdrawal your funds to a personal wallet as soon as you are done trading. This will help to ensure that your funds are safe even if the exchange is hacked.

Third, be sure to diversify your portfolio by holding a variety of different assets. This way, if one asset loses value, your portfolio will not be severely affected.

By following these tips, you can help to ensure that your funds are safe when trading crypto.

SokuSwap: Our top recommended DeFi exchange

Now that you know what to look for in a DeFi platform, let's take a look at our top recommended exchange: SokuSwap.

SokuSwap is a decentralized exchange that is built on the Ethereum blockchain. It is permissionless and open source, and it offers a variety of features that make it an attractive choice for traders. The platform has built an excellent reputation amongst traders and has a large community of crypto enthusiasts who actively use the platform.

Some of the key features of SokuSwap include:

- A user-friendly interface that makes it easy to trade crypto
- Industry-leading security practices such as two-factor authentication
- A transparent fee structure with no hidden fees
- liquidity pools that allow users to earn interest on their assets

If you're looking for a safe and easy to use DeFi platform, then SokuSwap is a great option.

Frequently asked questions

Are decentralized exchanges regulated?

Most decentralized exchanges are not currently regulated. However, this is likely to change in the future as the industry matures.

What is the best platform for DeFi?

SokuSwap is our top recommended platform for DeFi. It is easy to use, has a user-friendly interface, and offers a variety of features that make it an attractive choice for traders.

How safe is crypto DeFi?

Crypto DeFi is generally considered to be safe. However, there are always risks involved in trading cryptocurrency and you should always do your own research before investing.

How to know is a DeFi platform is a scam?

There are a few things you can look for to help you avoid scams. First, be sure to do your own research and only use platforms that have been recommended by a trusted source. Second, watch out for platforms that promise guaranteed returns or that require you to send them your private keys. If something sounds too good to be true, it probably is. Finally, be sure to diversify your portfolio by holding a variety of different assets. This way, if one asset loses value, your portfolio will not be severely affected.

Posted 
Jul 11, 2022
 in 
DeFi Education
 category

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