The rise of decentralized finance (DeFi) over the past decade has ushered in a new era of financial freedom and efficiency, allowing users globally to access traditional banking services such as lending, savings and trading without the intervention of centralized intermediaries. However, according to Tan Phat Digital's analysis, along with the promises of outstanding profits and transparency of blockchain, this ecosystem also contains complex, multi-layered risks, requiring a deep understanding of both cryptography techniques and economics. For newcomers, DeFi is not just an investment opportunity but also a maze of risks ranging from code errors, sophisticated cyber attacks to unforeseen mathematical fluctuations of automated market making models.
Overview of the DeFi landscape and risk dynamics in 2024-2025
The DeFi market in 2024-2025 has witnessed the dramatic fluctuations, reflecting both growth potential and systemic vulnerability to macro and micro shocks. Total value locked (TVL) in DeFi protocols at one point spiked from $182.3 billion to a record high of $277.6 billion in mid-2025, before coming under pressure to decline sharply in the fourth quarter to around $189.3 billion. This volatility exposes DeFi for what it truly is: an ecosystem that is moving into global finance but still struggling with issues of over-leverage and governance fragmentation.
The shift from DeFi 1.0 to DeFi 2.0 has marked the community's efforts to overcome limitations in liquidity, scalability, and capital efficiency. DeFi 2.0 aims to optimize assets locked in protocols, while minimizing risks from massive token dumping in high-interest projects. However, increased technical complexity also means new vulnerabilities are emerging, making individual investors more vulnerable than ever.
See more: What is DeFi (Decentralized Finance)? - Vision 2025-2030
Market context in Vietnam
In Vietnam, interest in DeFi and cryptocurrency in general is at a very high level, but along with that comes an ominous situation regarding security and legality. Tan Phat Digital noted that Vietnam currently has no official regulations on cryptocurrency investment activities, which means that investors are not protected by law when risks occur. Cryptocurrency investment scams account for the leading proportion of online fraud types in Vietnam in 2024.
Detailed damage index in 2024:
In Vietnam: Total online fraud damage reached 18,900 billion VND. The rate of investment fraud is the highest among all types of cybercrime.
In the world (According to FBI): Total losses related to cryptocurrency reached 9.3 billion USD with nearly 150,000 complaints.
Proportion of losses from investment fraud: Accounts for about 62% of total global losses (equivalent to 5.82 billion USD).
Victim rate: For every 220 smartphone users in Vietnam, 1 person becomes a victim of online fraud.
In-depth analysis of smart contract risk (Smart Contract Risk)
Smart contract risk is the most fundamental and difficult to control type of risk in DeFi. Smart contracts are self-executing software programs on the blockchain that act as agreements between parties without the need for intermediaries. However, because they are written by humans, they cannot avoid logic errors or programming flaws that hackers can take advantage of.
Error mechanisms and typical attacks
Hackers often exploit vulnerabilities left by "accidental" programmers to change the terms stipulated in contracts or drain users' assets. A typical example is the Yam Finance project, a victim of the rush to bring products to market without a thorough security assessment (audit). A serious bug in the protocol caused the project to collapse shortly after launch. Similarly, the DODO project also recorded losses of up to 3.8 million USD due to hacker attacks.
Hackers' tricks are increasingly sophisticated, sometimes leading to a series of projects being hacked within just one month. This shows that risk lies not only in the source code of a single project but also in the interdependencies between protocols. When a platform protocol fails, it can lead to the collapse of other dApps that are using it as a data feed (oracle) or collateral.
Audit process and its limitations
Smart contract auditing is a process in which professional security units analyze source code to look for vulnerabilities. Tan Phat Digital notes that the audit report is not a talisman that ensures 100% safety. It is just an assessment at a certain time on a specific source code version.
Reputable and specialized Audit units:
CertiK: Multi-chain expertise (Ethereum, BSC, Polygon), providing safety score rankings. Audited for PancakeSwap and many projects supported by Binance Labs.
ConsenSys Diligence: In-depth understanding of the Ethereum network and common errors on EVM virtual machines. Responsible for major projects in the Ethereum ecosystem.
OpenZeppelin: Provides SecOps security tools and ERC-20 contract standards. Trusted by many critical infrastructure protocols.
The audit process typically includes steps from defining scope, quoting, running automated and manual tests, creating bug drafts, and finally publishing the report. For newcomers, checking whether a project has been audited by reputable units like CertiK is an important risk screening step.
See more: Compare decentralize floors How are uniswap and centralize binance different
Fraud matrix and asset appropriation techniques in Crypto
In a borderless and uncontrolled financial environment, forms of fraud thrive targeting the inexperience of newcomers.
Rug Pull and Ponzi projects
Rug Pull is the most common form of fraud, accounting for more than 80% of cryptocurrency scams. In this scenario, the developer creates a project with attractive profit commitments, creating virtual liquidity to attract capital. When the amount of assets is large enough, they suddenly withdraw all liquidity and disappear. Ponzi model projects (taking money from the next person to pay the previous person) are also often hidden in the form of high-interest investment programs (HYIP).
Honey Pot and Fake Token
Another sophisticated trick is Honey Pot (Honey Trap). The scammer designs the smart contract so that users can only buy tokens but can never sell them. In addition, creating fake tokens with the names of famous projects or technologies (such as OpenAI Token, ETH20) is also a common way to lure users into mistakenly buying.
Phishing Attacks and Scam Airdrops
Phishing attacks are aimed directly at stealing users' private keys. Hackers use fake websites that have an interface 99% similar to the official website.
Fake domain name: For example
pancakeswqp.financeinstead ofpancakeswap.finance.Scam Approve: Hackers send strange tokens to the wallet with a reward link. When users click "Approve" without reading carefully, they are essentially giving permission to the scammer to drain the wallet's assets.
Impersonating technical support: Hackers impersonate exchange staff to trick Seed Phrase (recovery phrase).
Financial Risks and Impermanent Loss Mechanism
In addition to the risks external risks, DeFi users also face internal risks from the operating mechanism, typically Impermanent Loss (IL).
The mathematical nature of Impermanent Loss
IL occurs when users deposit money into a liquidity pool and the value of those tokens changes compared to the time of deposit. This loss is called "temporary" because it is only actually realized if users withdraw assets from the pool while the rate is still skewed. Most DEXs use the AMM algorithm based on the formula X x Y = K.
Projected loss ratio according to price fluctuations:
Price change is 1.25 times: Temporary loss is 0.6%.
Price change is 1.5 times: Temporary loss is 2.0%.
Price change is 2.0 times: Temporary loss is 5.7%.
times: Interim loss of 25.5%.
For extremely high volatility asset pairs like meme coin, IL can wipe out all profits from trading fees and yield farming rewards.
Operational Risk and User Errors
In DeFi, users hold absolute control, but a small mistake can lead to leading to total loss of assets.
Secure private key (Private Key) and recovery phrase (Seed Phrase)
Seed Phrase is a string of 12 or 24 characters that acts as a universal key. A common user mistake is storing Seed Phrase online (emails, phone notes, photos). Malware can scan the device to steal these files, leading to the wallet being "emptied" in just a few seconds.
Sending to the wrong network (Wrong Network)
Users often send assets to a wallet address on an incompatible network. For example, deposit USDT over the TRC-20 network to a wallet address that only supports ERC-20. In many cases, if you do not know how to enter your wallet into supporting software, your assets can be stuck forever.
Safe management framework and risk mitigation strategy from Tan Phat Digital
To participate in sustainable DeFi, Tan Phat Digital suggests that investors need to shift from the mindset of seeking quick profits to proactive risk management.
Compare Hot Wallet and Wallet Cold Wallet
1. Hot Wallet:
Internet connection: Always connected.
Convenience: High, suitable for daily transactions and Airdrops.
Security: Lower, vulnerable to online hacker attacks.
Cost: Free fee.
2. Cold Wallet:
Internet connection: Offline.
Convenience: On average, need to connect a physical device when making transactions.
Security: Very high, effective against remote hackers.
Cost: Cost of purchasing equipment equipment (about 2-3 million VND).
Optimal strategy: Use cold wallets to store main assets and hot wallets with a small amount of capital to interact with DeFi applications.
10 "vital" security principles
Write Seed Phrase on paper: Store absolutely offline, store in at least two safe places All.
Use cold wallets for large assets:Any investment over $1,000 should be protected by a physical device.
Split assets: Never put all your money in a single wallet address.
Check the wallet address carefully: Always check the first and last 4 characters before sending money.
Only access from Bookmarks: Avoid advertising results on Google to avoid falling on fake pages.
Regularly Revoke access rights: Use tools like Revoke.cash to cancel approval rights for contracts that are no longer in use.
Using a personal network: Absolutely do not transact on public wifi plus to avoid data eavesdropping.
Be wary of high profits: Any profit commitment over 15%/year needs to be carefully evaluated.
Use your own browser profile: Only install necessary wallet utilities, do not install strange extensions.
Never trust Admin Support: Real support staff will never proactively text your Seed Phrase request.
Tool ecosystem to support project safety testing
Before investing, Tan Phat Digital recommends you use the following DYOR toolkit:
Token Sniffer: Check the token source code to find vulnerabilities.
- no.
DefiLlama: Tracks TVL data and the actual health of the protocol.
Review of reputable DeFi protocols for newbies
1. Uniswap (Exchange - DEX):
Advantages: Most reputable, large liquidity, supports Layer 2 multi-chain.
Risks: High gas fees on Ethereum, high risk of temporary loss for liquidity providers.
2. PancakeSwap (Exchange - DEX):
Advantages: Extremely cheap fees on BNB Chain, friendly interface, many features.
Risks: Many listed junk projects, risk of fraud from third-party projects.
3. Aave (Lending):
Advantages: Transparent, stable interest rates, extremely good security testing.
Risks: Complicated interface for newbies, risk of asset liquidation.
4. Curve Finance (Stablecoin DEX):
Advantages: Extremely low slippage when exchanging stablecoins, safe profits for depositors.
Risks: Difficult to use interface, mainly only supports stable assets.
5. Lido Finance (Liquid Staking):
Advantages: Allows ETH to be staked for interest while still maintaining liquidity through stETH.
Risks: Risk of losing de-peg between stETH and ETH.
5-step roadmap to participate in DeFi security full
Step 1: Learn about Cryptonomics and Basic Security. Learn about blockchain, gas fees and phishing attacks.
Step 2: Set up a wallet and protect Seed Phrase. Record it on paper and store it safely offline.
Step 3: Start with a small capital on the price network cheap. Use BNB Chain or Polygon to get acquainted with low-cost swap operations.
Step 4: Experience low-risk products. Save stablecoins on Aave or Curve to understand the mechanism of earning interest.
Step 5: Expand to complex Yield Farming. Only join when you have a good understanding of Interim Loss (IL) and know how to use project review tools.
Frequently Asked Questions
1. Is DeFi really safe?
DeFi is not safe in the traditional banking sense. It offers financial autonomy but comes with technical risks (source code errors), financial risks (price fluctuations) and security risks (hackers). Because there is no controlling intermediary, you must take full responsibility for all your errors.
2. What is Rug Pull and how to identify it?
Rug Pull is a form of fraud in which the developer withdraws all collateral (liquidity) and disappears, causing the token to completely lose value. To avoid this, you should use tools like RugDoc or Token Sniffer to check whether liquidity has been locked or not and the project has been audited by reputable units like CertiK.
3. What to do when sending to the wrong network (Wrong Network)?
If you mistakenly send to a personal wallet (like MetaMask), you can get it back by entering the Private Key or Seed Phrase into a wallet software that supports that network. However, if you mistakenly send to a centralized exchange (CEX) wallet, you must contact the exchange's support team; This process is often costly and does not guarantee 100% success.
4. What is Impermanent Loss?
This is the loss that occurs when you provide liquidity to the pools (Liquidity Pool) and the price of the tokens fluctuates compared to the time of deposit. This loss is called "temporary" because it can disappear if the token price returns to its original rate, but becomes permanent if you withdraw funds from the pool while the rate is still off.
5. Why should you use a cold wallet instead of a hot wallet?
Hot wallets (MetaMask, Trust Wallet) are always connected to the internet so they are susceptible to virus or hacker attacks. Cold wallets (Ledger, Trezor) store private keys offline, only connecting when needed to sign physical transactions, providing optimal security for large assets.
6. How to check whether a DeFi project is reputable or not?
You should perform the DYOR (Do Your Own Research) process: Check the development team (Team Dev), review Tokenomics (token allocation mechanism), read the Whitepaper and especially check the audit report (Audit) from units like OpenZeppelin or ConsenSys Diligence.
7. What is Revoke.cash and why do newbies need to know?
When interacting with DeFi, you often have to "Approve" the smart contract the right to use tokens in the wallet. Revoke.cash helps you revoke these permissions when they are no longer in use, preventing the risk of hackers taking advantage of old approval permissions to drain money from your wallet.
8. Does Vietnamese law protect me when investing in DeFi?
Currently, Vietnam does not have regulations to protect investors' rights when there is a loss in DeFi. However, from January 1, 2026, the Digital Technology Industry Law 2025 will take effect, clarifying the concepts of digital assets and encrypted assets, creating a foundation for a more transparent legal framework in the future.
9. Should you choose Uniswap or PancakeSwap to start?
If you have small capital and want cheap fees, PancakeSwap on the BNB Chain network is the right choice. If you want to trade major coins with high liquidity and long-standing reputation, Uniswap on the Ethereum network (or Layer 2 like Arbitrum) is the optimal choice, although gas fees may be higher.
10. How to avoid being scammed by Phishing?
Absolutely never share the Seed Phrase (12-24 recovery words) with anyone. Always access DeFi protocols through previously saved bookmarks instead of searching on Google to avoid mistakenly clicking on fake websites run by hackers advertising.
The decentralized finance market (DeFi) is a technological revolution but also a "Wild West" in terms of risk. For newcomers, Tan Phat Digital believes that the key to success does not lie in finding huge profits, but in the ability to keep initial capital safe.
By using cold wallets, regularly revoking access, and always taking DYOR seriously, you can leverage the power of DeFi in a sustainable way. Always remember: in DeFi, you are your own bank, and its safety depends entirely on your vigilance. Tan Phat Digital hopes this article will be a solid luggage for you on your upcoming investment path.
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