With all the hype surrounding DeFi, it has turned into a breeding ground for scams and malicious projects. As more money pours into the space, it becomes more and more attractive to carry out scams. It can be a dangerous place if you are not really sure what you are doing and just blindly following others. In this article we will give some points to look out for and potential red flags when scouring the world of DeFi. This only serves as a basic guide, before using any DeFi applications make sure you do your due diligences.
What is the project about
The very first thing on the list is the project itself. It is just getting to know what the project is about, what are they trying to achieve through the project. Even though innovation is abundant in DeFi, there are many copycats as well. Usually successful projects will have many copycats, some will just be a carbon copy, some will have a different spin to it. The exact copies are mostly not worth the time as they do not bring additional value to the table. Sometimes they are just trying to ride on the success of previous projects and attract money for their scam. On the other hand, the others with modification might or might not be good depending on how much added value it brings. This part will take a bit of research but it is useful to filter out the undesirable projects.
You might be thinking that any project is able to promise anything but how can we be sure they are able to deliver on it. This is where the team comes in, they play a crucial role in bringing the ideas and innovation to fruition. It could possibly be one of the most important factors that determine if the project succeeds or fails. A way to evaluate the team is to look at each member and see what projects they are involved in previously, how long they have been in this space and what roles they were in. If they were from a good established project, they would have valuable experience from it. In general a longer track record, and having more successful projects under their belt is a good thing.
In crypto there is an element of anonymity, some projects choose to keep their founders and teams anonymous. An example is Bitcoin, the true identity of Satoshi Nakamoto would most likely never be known. The problem with anonymous teams is that it is close to impossible to hold anyone accountable when the project turns out to be a scam. To put it in another way, many scams are run by anonymous teams, so as not to be held accountable or have any damage to their reputation. That being said, not all anonymous teams are scams, there are numerous legitimate projects with anonymous teams in DeFi.
Besides looking at the core team, we could look at the backers of the project as well. If the project is able to attract big reputable venture capital firms, it might be worth diving deeper to understand the project better.
The code/smart contract
For this part having knowledge in coding would be an advantage. If the code of the project is open source, anyone can take a look and potentially flag out any malicious intent. The bigger the project the more reliable this is as more people would have taken a look at the code.
For the rest of us with no coding knowledge, the next best way is to check if the project has been audited. Not all audit firms are equal so we have to do a little research here as well. While an audited code or smart contract is better than an unaudited one, ultimately it still does not guarantee complete safety. There will always be risk involved as people will find new ways of hacking and exploiting.
Token economics is a critical component of a DeFi project. If the project is launching a token of their own, there should be full transparency of the distribution. Things to take note are the total supply, the percentage breakdown of the distribution, are tokens locked and when are they unlocked. If the breakdown of the token distribution is not given, it is immediately a red flag, as you would not really know what you are buying into. Other potential red flags are a large founder allocation and huge unlocks. Huge unlocks can lead to dumping in the market. Overall, a poorly designed tokenomics will be detrimental to the project.
Mars Panda World
Hopefully this article has given you a starting point on what to look out for in DeFi projects. Here at Mars Panda we aim to be transparent and our information can all be found in our whitepaper. Mars Panda serves to be the one-stop trusted platform integrating games, DeFi and NFT. Our team comprises leaders with years of experience in the blockchain space. Moreover, Mars Panda is Headquartered in Singapore, and while trying to best comply to Singapore Regulations, has commissioned an entity that has obtained a regulatory exemption under the Payment Services Act (“PSA”) for digital payments token services, Legatus Global Pte Ltd to be issuing the Mars Panda Token (MPT) as well as doing the KYC/AML during the private sales and distribution of tokens to private investors. This allows users to be rest assured of the security of Mars Panda platform. Additionally, our smart contracts will be audited by a reputable auditing firm specialized in smart contract security.
The future is now, and the future is Mars Panda.
About Mars Panda
Mars Panda is a complete eco-system which consists of:
• Games, Social Media and Ecommerce Aggregation
• Yield farming DeFi
• Mars Panda game with NFT game elements
• NFT Marketplace
We aim to fuse mainstream eCommerce and Gaming to the crypto world of NFTs and DeFi, on one seamless, unified platform.
Find us at:
Legatus Global Pte Ltd is an entity that has obtained a regulatory exemption under the Payment Services Act (“PSA”) for digital payments token services. Legatus Global is commissioned to handle the issuance of Mars Panda Token (MPT) as well as the KYC/AML during the private sales and distribution of tokens to private investors. Legatus Global is also handling the process for private sales and distribution.