How to protect yourself while you trade on DApps and away from scams
DApps also known as decentralized applications are computer applications that run on decentralized computing system. They run on a blockchain or P2P (Peer-to-Peer) network of computers instead of a single computer and are outside the control of a sole authority.
DApps which are often built on the Ethereum platform can be developed for a variety of purposes including gaming, finance, and social media.
That being said, protecting yourself while trading on DApps is paramount. The following are ways to identify scams while trading on DApps:
- Project purpose: this is very important as questions such as; does the project try to do something new and innovative? What is the project contributing to the digital economy? Is there any difference between the project and its competitors? Is there a unique value proposition? need to be answered before you embark on such project. And therefore you are able to eliminate a good percentage of scams on DApps.
- Accountability: Its no news that the blockchain sphere is majorly based on anonymity. Nevertheless, if the founders are anonymous and turn out to be scammers, it may be a bit difficult for them to be held accountable for malicious behavior. That goes without saying that not all anonymous founders projects are scams but because of accountability.
- Token distribution: this is a crucial aspect you have to research critically if you wish undertake any Defi project. One of the major scams done is inflating the token price while having a huge holding and then dumping it on the market. Token distribution models have a lot of subtle details to go consider and in most cases it is difficult to get a hold of this information. So you have to be very informed about the Token distribution model the founders plan to use before embarking on the Defi project.
- Development activity: Defi is closely related with the custom of open source coding. A little understanding about coding avails you the opportunity to take a look at the code yourself and by so doing you can uncover any malicious activity the project intends.
In conclusion, whether you want to use DApps for yield farming or simply for exchange and trade, Defi scams are abundant. Trusting that the few tips above can help you spot malicious projects and scammers.
You still have questions about DApps? Check out the academy https://academy.binance.com/en
Be safe!
