A Scam that Wasn't

Bitcoin Talk and Cryptocurrencies Cryptocurrency In the News
1

Hellooooo. :blush: I was just scrolling through Tiktok once again and I found this one which talked about DeFi 100. Have any of you heard about the DeFi100 scam issue? :open_mouth: Any of you guys trading it? It was interesting because apparently, it wasnā€™t legit and that a Twitter user was spreading this fake news. :open_mouth:

I wonder how this will affect the future of this crypto though. :thinking:

2

@ria_rose, Back in August 2020, BP Member Krugman25 was all over DeFiā€¦ The other administratorā€™s of BabyPips would remember himā€¦ A bit of due diligence shows he was still involved in DeFi early in 2021.

He still pops in for a read every now and thenā€¦ He maybe able to extend on the Fox Business Article.

I have noticed all his website links are no longer activeā€¦ Still alive over on twitterā€¦

2 Likes
3

Oh yeaaaah! :open_mouth: Thank you for reminding me @Trendswithbenefits! :open_mouth: I canā€™t believe I forgot about him for a quick minute. :sweat: Maybe Iā€™ll look him up on Twitter to also see what he has to say about this. :thinking: But how about you? Have you heard of this scam issue? :open_mouth:

4

Looked him up, yup looks like he found a community over there!

5

I had not heard of it, but I am not surprised, unfortunately. DeFi exchanges have contributed to 21% of the total volume of cryptocurrency related crime in 2020 ā€“ the staggering $99.2 million worth of assets have been stolen or laundered.This is due to their substantial presence on the crypto markets as well as the lack of anti money-laundering measures on such exchanges.

6

Ooh. :open_mouth: Good for him then! :blush: He might be more invested in crypto now than forex. :thinking:

7

Oh wow. :open_mouth: There are lots of coins on the market and so DeFi having contributed 21% of the crypto crimes says a lot. :thinking:

1 Like
8

That and the increasing number of ransomware eventsā€¦

1 Like
9

The scale of the scams and other illegal activity using cryptos is very disturbing. Scams happen everywhere, true, and they happen using fiat money. The problem with cryptos is that they are poorly regulated and largely untraceable, and that is a feature, not a bug. So various criminals take advantage of that.

10

Iā€™m still here! haha. Yes, Iā€™m mostly active on Twitter (https://twitter.com/krugman25). I also have a YouTube channel where I talk about how to use various DeFi protocols Level Up! DeFi - YouTube, although Iā€™m taking a break from making any more tutorials until at least this fall.

DeFi is a broad term that covers any type of decentralized, smart contract driven protocol. DeFi has continued to grow rapidly and as of this post thereā€™s around $120B worth of capital in DeFi (DefiLlama - DeFi Dashboard). As with anything, thereā€™s going to be stuff thatā€™s legitimate and stuff thatā€™s a scam.

11

DeFi 100 was an exit scam. The devs ended up taking the money and running.

Thereā€™s a couple important things to consider in DeFi when figuring out the relative risk of a protocol.

  • Does a single person or a small group of people have the power to take all of the funds? These protocols are all code-driven, so the devā€™s can only do what the code allows them to do. Most legitimate protocols have a ā€œSecurityā€ section on their website that covers this. Some protocols are 100% trustless which means nobody can make any changes to the protocol or take funds, such as Uniswap. Some protocols use multisigs so that teams can make upgrades/fixes but it usually requires a group of 5-9 people to all sign off on the change. This helps decentralize some of the power and mitigate the risk of funds being stolen. There are some protocols where a single wallet has complete control over the protocol. That means a single person could unilaterally make changes to the protocol or steal users funds. This is obviously the most risky.
  • A second factor is how long a protocol has been around. Typically these type of exit scams happen early on in a protocols life. Protocols that have been around for a long time, have an actual product that is actively used, and have build up trust with the community are safer, imo.
  • Sometimes money isnā€™t lost via a scam, but rather poorly written code that is exploited. The majority of money lost is via exploits and not exit scams. Just like above, the longer a protocol has been running the less likely it is that it will be exploited since hackers would have likely already exploited it if they had found exploitable code.

In a nutshell, if someone wanted to either use or invest in a DeFi protocol itā€™s best to stick with protocols that 1) are either completely trustless or at least use a large multisig 2) have been around for a long time 3) have well known and trusted teams. Even then itā€™s not totally risk free, but the relative risk is significantly reduced.

1 Like
12

@ria_rose
You wont get a better answer from a more qualified person than @krugman25
What he doesnt know about DeFi isnt worth knowing

1 Like