Take the money to enjoy the Bullfarm and end up losing it all. This is a recent "case study" to warn you about how dangerous DeFi is. The key, the wallet and the assets are all yours, then how can they just disappear without any reason after connecting to another platform? How to farm crypto safely? The causes and solutions to the safer farming process in DeFi will all be explained in this article.
DeFi - A double-edged sword
The decentralized financial market (DeFi) gives you a lot of opportunities to profit from the hottest gems with high chances of price increase to participate in Farming, Staking with high interest rates. However, the game can be more simple when you understand it well and know its rules.
On the other hand, when DeFi became a trend, there was a great deal of lending, borrowing, yield farming,... projects created without any long-term development orientation. Those who lack knowledge and understanding of the project will easily fall into their traps.
Besides, various ways of more sophisticated scams are emerging. These scams can attack users’ assets even though they do not connect their wallet to any platform. Please stay alert and do your own research (DYOR) before making any farming or trading decisions since there won’t be any “Undo” button for you to go back.
Causes of losing money when Farming Crypto
Due to the errors of Smart Contract, the interference of changing data from Oracles caused farming protocols to be hacked and damaged the platform. For example, some recent "explosion" cases that caused indirect damage to assets on the farming platform have risen, such as Harvest Finance, Origin Protocol, etc. Users will receive compensation if the platform is reputable and trustworthy. Otherwise, they are likely to lose their crypto assets.
Of course, these incidents were utterly unavoidable, and no one expected it to happen.
Some yield farming, lending, and staking projects have had hacking issues in the past. Harvest Finance was the one with the heaviest loss of approximately $33.8 million.
First and foremost, you should have an overall view of farming. It is the activity of providing liquidity into pools on a protocol or platform to generate profits from crypto assets.
To begin with, you must connect your wallet to the farming platform. Then, you must Approve the transactions in order to start swapping or farming.
Approve means approving the Smart Contract/farming platform owner to have the right to connect, access, and have complete control of your funds to swap or provide liquidity to the pool.
For example, if you want to farm 1000 ABC Tokens into pool X of platform Z, you need to provide liquidity to pool X by connecting a personal wallet containing 1000 ABC Tokens, then click Approve so that the platform's smart contract can connect to the wallet.
After clicking Approve, platform Z has full rights to use the approved limit of 1000 ABC Tokens.
- Case 1: With a good, reliable project → The project transfers your funds to the pool for farming.
- Case 2: With a scamming project → The project takes advantage of the vulnerability in the Approve stage to swap (trade) your coin into another coin → Withdraw the pool's liquidity and disappear → You lose money without any notice.
The Approve stage also has the Unlimited Approve feature - it is a feature that allows the platform smart contract to fully handle the maximum amount of all assets contained in your wallet.
- Pros: Saving transaction fees, fast operation, no need to click Approve for the next transactions and farming processes, no time limit for approving.
- Cons: Direct risks to the assets by giving 100% rights to the contract owner.
Recently, an issue that many people have encountered is the appearance of many shitcoins, strange coins in their wallets even though they have never traded or bought them. This is definitely a sophisticated trick by scammers. If you transfer that amount of coins to another wallet or perform a swap transaction, your wallet will be at risk and chances are the remaining assets will disappear or you will lose transaction fees.
How to farm crypto safely and minimize the risk of wallet hacking?
Store assets in different wallets
It would be best to store assets in different wallets. Especially, create a wallet only to store assets without connecting to other smart contracts or platforms.
If you want to farm any coin, you need a wallet dedicated to farming. It means that you will only transfer funds from exchanges or other wallets to the farming-only wallet. In case you accidentally farm a fraudulent project, you will only lose the assets in that wallet.
It is not recommended to use the Unlimited Approve feature
It is not recommended to use the Unlimited Approve feature. All you need to do is approve the exact amount of coin you want to farm. This will ensure the safety of your asset even though it is quite laborious and costly when each farm has a different approval.
Do not farm recklessly
You might see many organizations introduce farming platforms with a high annual interest rate (APY) without any verified authentication. Your asset will most likely vanish into thin air if you pour money into these farms.
Please carefully consider whether the project is audited or not. Of course, audited projects are still at risk of being hacked, but you will have more confidence in these projects. After that, take a look at the team, technologies, roadmaps and development plans to evaluate the project before putting money into farming.
Revoke token allowances after interacting with DApps
It’s just a piece of cake to revoke permissions on Coin98 Wallet. Please follow the easy process below:
Step 1: Access Coin98 Wallet, and choose Terminal
Step 2: Select Wallet Approval
Step 3: Click to a wallet you often interact with DeFi services.
Step 4: In this interface, you can revoke the permission of any desired contract by clicking on the [x] icon.
Step 5: Choose Confirm for completion and wait for seconds. All done!
In addition, you can use the Hidden Tokens feature to hide the strange tokens from the main interface to avoid the risk of accidentally clicking on them.
How to farm crypto conveniently and save money?
You can start staking, farming on many different blockchains such as Ethereum, Binance Smart Chain, Huobi Eco Chain,... on Coin98 Wallet through the Dapp Browsers with just a few simple and extremely convenient actions.
Just click Browser on the Coin98 Mobile Wallet home screen, then select a farming platform → Select the wallet containing the coins you want to farm → Start farming.
Besides, Coin98 Wallet has a ‘gas bar’ feature to help you optimize the farming costs with high processing speed and reasonable cost.
Let's get started with Coin98 Wallet via this article: What is Coin98 Wallet? How to use Coin98 Wallet in detail
At the same time, farm as soon as possible when the information is verified since your farming token will be at the best price. It also avoids a price deep drop, being liquidated or getting "Impermanent Loss".
Be serious when talking about monetary topics. Be responsible for your assets. Do not click approve continuously while you don’t understand what it is to avoid getting a bitter ending. Do not allow crooks to steal your money effortlessly due to your own carelessness.
Many people lose money due to silly mistakes like this and I don't want you to become the next victim!
Please learn the rules of the game, acknowledge yourself well before joining the battle. If you have any questions or ideas, please feel free to comment below for further discussions!