How to Check if a Protocol is Safe
Before depositing funds, verify protocol safety. This checklist helps you identify risky protocols.
Safety Indicators
| Factor | Green Flag | Red Flag |
|---|---|---|
| . . . . | . . . . . . | . . . . . |
| Audits | Multiple audits | Unaudited |
| TVL | >$50M, stable | Low, volatile |
| Team | Doxxed/known | Anonymous |
| Time | 6+ months live | Brand new |
Where to Check
- DefiLlama: TVL and history
- DeFiSafety: Audit scores
- Etherscan: Verified contracts
- Twitter/Discord: Community
. -
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Step-by-Step Instructions
1
Check Audit Status
Find audit reports. Verified by reputable firms like Trail of Bits, OpenZeppelin.
Tips
- ✓More audits = better. Recent audits preferred.
2
Verify TVL History
Check DefiLlama for TVL stability. Avoid sudden drops.
Warnings
- ⚠Sudden TVL drops can indicate exploits or rugs
3
Research Team
Look for team info. Doxxed teams are more accountable.
Tips
- ✓Unknown team is higher risk but not disqualifying
4
Check Track Record
How long has it been live? Any past incidents?
Tips
- ✓6+ months without issues is encouraging
5
Verify Contracts
Check Etherscan for verified source code and any warnings.
Warnings
- ⚠Unverified code is a major red flag
6
Start Small
Even after due diligence, start with small amounts.
Tips
- ✓Test with small deposit before large allocation