DeFi security risks often lurk in unexpected places, threatening user funds and protocol integrity. This article unveils critical yet overlooked vulnerabilities in the DeFi space, drawing on expert insights to highlight potential dangers. By understanding these hidden risks, readers can better protect their assets and contribute to a more secure DeFi ecosystem.
- Beware of Unlimited Token Approvals
- Cryptojacking Silently Drains Resources
- Smart Contract Dependencies Pose Hidden Threats
- Oracle Manipulation Endangers DeFi Protocols
- Centralized Oracles Create Vulnerability
- Front-End Compromise Outweighs Contract Risks
- Centralized Governance Threatens User Funds
- Front-End Attacks Exploit User Trust
Beware of Unlimited Token Approvals
One of the most overlooked DeFi security risks? Unlimited (or off-chain) token approvals.
Most wallets ask you to “Approve” a token just once—but under the hood, they often grant the contract an infinite allowance (2^256 – 1). That’s risky. If the contract gets upgraded, hacked, or you unknowingly sign a malicious off-chain permit (like EIP-2612 or Permit2), attackers can instantly drain your tokens without asking again.
This isn’t theoretical. In July 2024, the LI.FI bridge exploit used existing unlimited approvals to drain over $11.6 million. A few months later, in October, the Socket protocol exploit did the same, pulling $3.3 million from users who’d granted infinite token access months earlier. Coinbase’s research estimates that over $405 million has been lost due to similar approval exploits since 2020. Even high-profile users like Bill Lou fell victim—he signed a fake off-chain permit and lost $125,000 in USDC.
Why does this risk stay under the radar? First, off-chain approvals cost no gas, so they feel harmless. Second, wallet interfaces rarely distinguish between limited and unlimited approvals—they just say “Approve.” And because an exploit can happen weeks after the approval, most users never link the two events.
How to stay safe:
- Set custom spend limits. Use the “custom spend amount” option in MetaMask or Rabby during every swap. Don’t give more access than the transaction needs.
- Revoke stale approvals regularly. Use tools like Revoke.cash or Debank weekly to clear old permissions—even from trusted dApps.
- Use separate wallets. Keep one “hot” wallet for daily dApp interactions and one “cold” wallet for long-term holdings. If the hot wallet gets compromised, your main funds stay untouched.
- Simulate all approvals. Turn on simulation features in tools like Rabby or Anvil to preview what you’re actually signing before clicking “Approve.”
- Set approval alerts. Use Etherscan’s “Watch Address” feature to get notified instantly if a new approval is triggered on your wallet.
Rule of thumb: If the approval isn’t saving you more in gas than it risks in assets, limit it or revoke it. That extra click is cheaper than becoming the next headline in a multi-million dollar exploit.
Ahmed Yousuf
Financial Author & SEO Expert Manager, CoinTime
Cryptojacking Silently Drains Resources
Having worked with numerous businesses on cybersecurity, I’ve seen cryptojacking emerge as a severely overlooked DeFi security risk. This stealthy threat hijacks your computing power to mine cryptocurrency without consent, often going undetected for months while severely impacting system performance.
We recently helped a financial services client who couldn’t understand why their systems were sluggish despite upgrades. Our investigation revealed cryptojacking malware introduced through a third-party web app they were using, which had been mining for over 90 days undetected.
To mitigate this risk, I recommend implementing robust CPU usage monitoring tools that alert you to suspicious resource consumption spikes. Install quality ad blockers and script blockers when browsing DeFi platforms to prevent browser-based cryptojacking scripts.
Education is equally critical—train yourself and your team to recognize performance degradation signs like unusual fan activity or battery drain. Regular system scans specifically targeting cryptomining processes can catch these threats before they cause significant damage to your equipment or compromise your DeFi operations.
Randy Bryan
Owner, tekRESCUE
Smart Contract Dependencies Pose Hidden Threats
In my experience working with hundreds of enterprises on cybersecurity, the most overlooked DeFi security risk is smart contract dependencies. While many users scrutinize the main contract, they often miss vulnerabilities in dependent libraries or oracles that feed critical data to these contracts.
A recent client of ours lost over $300,000 when a seemingly secure DeFi protocol was compromised not through its core contract, but through a vulnerability in a price oracle it relied on. The attacker manipulated the price feed, triggering unfavorable liquidations.
To mitigate this risk, I recommend using blockchain security monitoring tools that specifically track dependencies and their interactions. Our security assessments show that organizations implementing comprehensive dependency monitoring reduce breach risks by approximately 40%.
Always research the entire ecosystem of a DeFi protocol before investing significant funds. Look for projects that have undergone multiple independent audits specifically examining their dependencies, and start with small test transactions to verify behavior across the entire transaction lifecycle before committing substantial capital.
Ryan Carter
CEO/Founder, NetSharx
Oracle Manipulation Endangers DeFi Protocols
One DeFi security risk that I believe is often overlooked is oracle and price manipulation. In many protocols, especially lending and synthetic asset platforms, the system relies heavily on external price feeds to determine collateral value or trigger liquidations.
If these oracles pull data from low-liquidity or easily manipulated sources, an attacker can artificially move prices, borrow against inflated collateral, or trigger unfair liquidations. I personally pay close attention to whether a protocol uses decentralized, time-weighted, or aggregated oracles like Chainlink, and encourage our team and community to do the same. For users, I would say always look under the hood. You need to check what feeds the prices before locking funds. This small habit can prevent major losses.
Kevin Baragona
Founder, Deep AI
Centralized Oracles Create Vulnerability
One DeFi security risk that I believe is often overlooked is the potential vulnerability introduced by centralized oracles. While DeFi prides itself on decentralization, many protocols still rely on external data feeds—called oracles—to bring real-world information, like asset prices, onto the blockchain. If a DeFi protocol uses a single, centralized oracle, or even a small group of easily compromised oracles, that reliance creates a significant single point of failure. An attacker could manipulate that oracle’s data, tricking the smart contract into executing trades or liquidations based on false price information, leading to massive losses for users. We’ve seen real-world examples where an attacker temporarily manipulated a token’s price on a specific exchange, and if a DeFi protocol relied solely on that exchange’s price feed, it could be exploited.
Users can take steps to mitigate this risk by thoroughly researching the oracle solutions a DeFi protocol uses. Look for protocols that employ decentralized oracle networks, like Chainlink, which aggregate data from numerous independent sources and use cryptographic proofs to ensure data integrity. This makes it far more difficult for any single party to manipulate the price feed. In addition to this, it’s wise to understand if the protocol uses a Time-Weighted Average Price (TWAP) mechanism, which takes an average of prices over a period, rather than relying on a single, instantaneous price. This helps smooth out any sudden, short-lived price fluctuations that could be caused by manipulation.
Furthermore, users should exercise caution with newer or less established DeFi projects that might cut corners on their oracle solutions. A good practice is to check if the project has undergone independent security audits, with a specific focus on how it handles external data inputs. A transparent project will openly share details about its oracle infrastructure and any safeguards in place. It’s about empowering yourself with knowledge and making informed decisions, rather than simply chasing high yields without understanding the underlying security mechanisms.
Michael Gargiulo
Founder, CEO, VPN(dot)com
Front-End Compromise Outweighs Contract Risks
What I really think is that most people focus too much on smart contract risks in DeFi and overlook a bigger threat—front-end compromise, especially when it intersects with AI-driven testing gaps.
Even if the core contracts are audited, a compromised interface can push malicious transactions. That’s exactly what happened with BadgerDAO. The attacker didn’t break the blockchain—they injected code into the UI. AI-driven testing could have caught this faster. We simulate user interactions using AI to detect behavioral anomalies or unauthorized DOM changes that static tests miss.
The bigger risk is assuming your front end is safe if your contracts are. It’s not. Users should simulate transactions with tools like Tenderly and validate URLs carefully.
DeFi teams need to include AI in their testing stack to monitor not just backend logic but also interface integrity. Without that, you’re leaving the door open.
Vivek Nair
Co-Founder, BotGauge
Centralized Governance Threatens User Funds
An overlooked risk in DeFi is centralized governance, especially in protocols that still rely on admin keys. It doesn’t always make headlines, but a single point of control can be exploited, leading to catastrophic fund loss if that key falls into the wrong hands or is misused.
The best way users can protect themselves is by doing a bit of due diligence. Choose protocols that use decentralized governance models, and check for third-party audits. If you’re comfortable, read the smart contracts or at least understand how they work.
We take a similar approach to platform security. We prioritize decentralization and transparency in our architecture because trust has to be built into the system, not assumed.
In the rush to innovate, it’s easy to miss the structural risks that don’t seem urgent—until they are. Being aware of how governance is handled under the hood can make all the difference.
Alexander De Ridder
Co-Founder & CTO, SmythOS(dot)com
Front-End Attacks Exploit User Trust
One sneaky risk people sleep on is front-end attacks—when hackers mess with the website interface of a legit DeFi app to reroute your wallet. You think you’re connecting to the real site, but you’re getting drained. The fix? Always double-check URLs, bookmark the real ones, and use tools like browser extensions that flag sketchy contracts. And don’t just trust the interface—verify the contract address yourself. In DeFi, one lazy click can cost you everything.
Justin Belmont
Founder & CEO, Prose
