MeowSwap Spotlight: Risks and rewards in DeFi

  • The volatility of crypto assets and especially the volatility of token prices may lead to losses in relative value when yield farming. There is a particular term - ‘impermanent loss’ for the possible consequences of DeFi staking. Impermanent loss occurs when the price of your tokens when you withdraw your liquidity position is different from what it was when they were initially deposited into the pool. This is called an ‘impermanent’ loss because the price divergence between the assets in the pool may eventually decrease - if this happens, the effects of the impermanent loss are mitigated. Please note that the reverse is not guaranteed. An impermanent loss is also called a divergence loss.
  • Security is a necessity - as we all know, smart contracts might have vulnerabilities, bugs or simply be written poorly. In this regard, please pay attention to whether the DEX holds an audit report from a reputable organization and if possible, how good the team’s technical expertise is through examining previous projects or personal profiles. We also advise you to check which software products are available on your chosen DEX — reputable,established DeFi exchanges usually aim for the best partnerships and software available on the market. Check for example; which wallets are integrated into the exchange and examine any strong, symbiotic partnerships they may have with other projects. Finally, if in doubt — ask them! send your questions to the tech support or other communication channels of the exchange; if they can’t answer questions they are doing something wrong!

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First working DEX on Cardano.