Smart Contract Vulnerabilities
Bugs or exploits in the code could put funds at risk.
What is this risk?
Decentralized lending platforms are powered by smart contracts — code that automatically executes loan terms on a blockchain. While this removes the need to trust a company, it introduces a different risk: bugs in the code. Smart contracts can have vulnerabilities that hackers exploit to drain funds. Even audited contracts can have undiscovered flaws. Once funds are stolen through a smart contract exploit, they're usually gone forever.
Think of it this way...
“Like a poorly built house, a flaw in the foundation (code) can cause everything to collapse. The difference is that anyone in the world can probe for weaknesses, and there's no insurance to rebuild.”
How to Protect Yourself
Practical steps you can take to reduce or manage this risk
Use only well-established platforms with multiple security audits from reputable firms.
Check the platform's bug bounty program — serious projects incentivize security researchers to find vulnerabilities.
Look for platforms with insurance funds or protection mechanisms for smart contract failures.
Never share your wallet seed phrase or sign transactions you don't understand.
If a platform reports a security issue, act quickly — withdraw funds or follow their security guidance.
Start with smaller amounts on newer protocols until they've been battle-tested.
See This Risk in Action
Explore real-world scenarios where this risk plays a role
Other Risks to Consider
Explore other risks to get a complete picture
Top Lending Platforms
Choose a provider and start borrowing today.
Some links are referrals that help support the site.