As DeFi projects continue to evolve, security remains a paramount concern for investors and developers alike. This article presents key insights from industry experts on assessing the safety of emerging DeFi projects. Learn about critical factors such as smart contract audits, governance models, and innovative security measures that can help safeguard investments in this rapidly growing sector.
- Prioritize Independent Smart Contract Audits
- Verify Third-Party Audit Reports
- Examine Admin Privileges and Contract Upgrades
- Assess Decentralization of Governance Model
- Evaluate Smart Contract Audit Transparency
- Implement Zero-Trust Architecture in DeFi
- Deploy AI-Powered Threat Detection Systems
- Seek Comprehensive Audit Reports from Multiple Firms
Prioritize Independent Smart Contract Audits
When it comes to emerging projects, one of the most critical security factors is whether the smart contracts have undergone a thorough, independent security audit by a reputable third-party firm.
This matters for a few key reasons:
First of all, immutable code poses an irreversible risk. Once the smart contract is deployed on-chain, its logic typically cannot be changed. If a bug or vulnerability is hiding in that code, it won’t take long for attackers to find and exploit it. But the main issue here is that users’ funds can be drained or locked forever. An audit helps uncover issues before deployment.
Depth and reputation are other serious issues for consideration. Even a cursory internal review is no substitute for a professional audit. Leading audit firms use both automated tools (static analysis, fuzzing, symbolic execution) and a manual, line-by-line review. Their track record (number of audits performed, public disclosure of findings, responsiveness to fixes) often signals how seriously they take security.
Last, but not least, there’s community confidence. When an audit report is published (ideally with full issue listings and explanations of how they were resolved), it lets third parties, be they security researchers, experienced developers, or even bounty hunters, verify that glaring flaws have been caught. That transparency raises the bar for the entire ecosystem.
In short, a properly executed, public audit is the best early warning system against critical exploits. Without it, there’s no real way to know whether a seemingly innocuous function could be manipulated to drain liquidity, mint tokens out of thin air, or bypass essential checks. Since DeFi projects directly hold and manage users’ assets, trusting unaudited code is essentially inviting a catastrophic loss.
Dmitry Mishunin
CEO, HashEx Blockchain Security
Verify Third-Party Audit Reports
Look out for verifiable smart contract audit reports by a trusted third party (such as protocol tech providers like OpenZeppelin or credible DeFi security vendors). The project’s readiness to invest in independent checks shows that the team takes security and user trust seriously, not just rushing for quick gains.
That being said, the audit itself doesn’t protect against failure, and the actual security depends on the team’s post-audit discipline. Take the 2021 Compound Labs case, where inaccurate smart contract upgrading after the audit led to the leak of $90M in tokens. Still, the chance that you’re looking at a secure DeFi project is much higher with a passed audit. Based on ScienceSoft’s DeFi audit engagements, pre-vetted protocols have always contained far fewer logic flaws and exploitable security gaps than those deployed without third-party checks.
Vital Soupel
Defi & Blockchain Consultant and Senior Business Analyst, ScienceSoft
Examine Admin Privileges and Contract Upgrades
One critical factor I always look for in a new DeFi project is how it handles admin privileges and contract upgrades. In simple terms, I want to know who can change the rules after launch, and how easily they can do it.
Even if the code looks secure and has been audited, it doesn’t matter much if a single person or a small team can upgrade the contracts or move user funds at will. I check whether the contracts are truly immutable or if upgrades go through a proper time delay, multisig, or community governance process.
This matters because most DeFi exploits don’t come from complicated hacks—they come from projects that leave too much power in the hands of a few people. If you can upgrade a contract instantly or access a hidden admin function, all the audits in the world won’t protect users.
So before I care about things like token price or yield, I always ask: who really controls this system? If the answer is “just the dev team,” I walk away.
Ahmed Yousuf
Financial Author & SEO Expert Manager, CoinTime
Assess Decentralization of Governance Model
When assessing a new DeFi project, the first area I examine is the governance model: is voting truly decentralized, or is it controlled by a few whale wallets? I have witnessed too many “decentralized” projects fall apart once insiders rug-pull or make decisions without consensus. A strong, dispersed-ownership DAO with clear mechanisms for proposal transparency is of utmost importance in incentivizing and aligning the community and making the protocol more resistant to malicious tampering and more flexible in the long run.
When a well-known yield farming project recently lost it all, it could be traced in large part to 60% of the governance tokens being in the hands of the founding team, which allowed them to drain liquidity overnight, a risk that proper decentralization helps to reduce.
Kevin Huffman
Day Trader| Finance& Investment Specialist/Advisor | Owner, Kriminil Trading
Evaluate Smart Contract Audit Transparency
One critical factor I always look for in an emerging DeFi project is the quality and transparency of its smart contract audits. This is paramount because smart contracts are the backbone of any DeFi project; they’re the code that governs all transactions and logic. If there’s a flaw in that code, it can lead to devastating losses.
Why is this so important? Unlike traditional finance where a bank might rectify an error, in DeFi, a bug in a smart contract can be immutable—meaning funds can be lost forever with no recourse. A thorough, independent audit by a reputable firm provides an essential layer of scrutiny, identifying vulnerabilities before they’re exploited. It shows that the project is serious about security and has subjected its core technology to expert review. Without clear evidence of robust audits, it’s like trusting your life savings to a lock without ever checking if it actually works.
Michael Gargiulo
Founder, CEO, VPN.com
Implement Zero-Trust Architecture in DeFi
From a security perspective, the most critical factor I look for in emerging DeFi projects is their implementation of zero-trust architecture. We’ve seen how the “trust nothing, verify everything” approach significantly reduces breach risks compared to traditional security models that assume internal network traffic is trustworthy.
When evaluating DeFi protocols, I specifically examine how they handle authentication beyond simple key possession. Projects implementing robust multi-factor authentication with biometric or hardware token components demonstrate a fundamental understanding of modern security requirements. One client reduced unauthorized access attempts by 87% after implementing our recommended MFA strategy.
I’m particularly concerned with how DeFi projects address supply chain vulnerabilities. The sophisticated attack on Chuys’ payment processing systems during my tenure as IT Director taught me that third-party dependencies create critical attack vectors. Strong DeFi projects thoroughly vet all external code libraries and maintain comprehensive vendor security assessments.
Quantum computing resistance is another essential consideration that many overlook. We’re advising clients to prepare now for quantum threats to current cryptographic standards. Forward-thinking DeFi projects are already implementing quantum-resistant algorithms to protect against future threats, ensuring long-term security as computing capabilities advance.
Joe Dunne
Founder & Owner, Stradiant
Deploy AI-Powered Threat Detection Systems
Autonomous threat detection and response capabilities are one factor I look forward to in an emerging DeFi project. Static snapshots from traditional security audits don’t suffice in an environment where new attack vectors surface daily.
Why?
DeFi protocols can’t rely on human reaction times while under attack. I look for AI-powered systems that can spot anomalies in real-time and take immediate action. Things like unusual transaction patterns or deviations in smart contract behavior never go unnoticed. This might mean pausing a function, adjusting parameters, or triggering alerts before damage is done.
We’ve built AI agents that do exactly that. They never sleep, but learn from every attack, and adapt faster than traditional systems ever could. Any DeFi protocol not investing in this kind of autonomous defense is flying blind in hostile territory.
Alexander De Ridder
Co-Founder & CTO, SmythOS.com
Seek Comprehensive Audit Reports from Multiple Firms
Our top critical security factor is a transparent smart contract audit. We look for public reports from at least two independent firms that list discovered issues and document how each was fixed. This matters because even a small oversight (like a reentrancy or integer overflow bug) can cost users millions in seconds and damage our reputation.
That is why a comprehensive audit story makes us confident that our code withstands real-world challenges and that all future updates will not disappoint our clients regarding quality and reliability.
Liutauras Morkaitis
Head of Customer Support Team, VPS Forex Trader
