Now, welcome to the digital Wild West! On one side, it’s the exciting new frontier of financial innovation where genius entrepreneurs and deep-tech hackers are making everyone rich quick on the digital gold rush. Never mind gold rushes, this is a crypto rush, and the dangers are equally dire. And just like those new boomtowns, there sure isn’t a sheriff in town. When it comes to protecting your assets, the ball is definitely in your court.

Recent research indicates that most of you aren’t doing it right. These mistakes almost shout, “Catch me!” Mingyi Liu’s research, which incorporated interviews and surveys, identifies some reliably appalling oversights. Here are five ways you’re practically begging to get rugged – and how to avoid it.

Blockchain Security Is Not Bulletproof

Assume that blockchain’s security by default will protect you? Wrong. That's like thinking a stagecoach is invincible because it's made of wood. Smart contracts, being a form of code, are not without flaws. Code can contain bugs, design flaws, or vulnerabilities. It’s not the quality of the foundation, it’s the quality of the building they put on top of that foundation.

Think of it this way: a bank vault is secure, but if you leave the keys lying around, it doesn't matter how strong the vault is. DeFi platforms are the buildings on the blockchain, and they can be broken into.

Don't assume a project is safe just because it's on a blockchain. Always do your own research (DYOR). Conduct a deep review of the smart contract code. Request audits from quality firms and understand the risks involved before putting your capital at risk. Approach each new platform as you would a rattlesnake – appreciate its beauty from a distance until you’re 100% confident it won’t strike.

Private Keys: Not The Only Defense

Right, so you figured out your private keys and stored them in Fort Knox! Good. That’s as dumb as having a safe for your gold. What happens if someone picks your pocket and steals the combination? I agree that the security of your private key is important, definitely — just like that’s not all there is to security.

This is a dangerous myth to believe — that as long as your keys are protected, your money is protected. Now consider vulnerabilities in the smart contracts you’re actually working with. What about front-end attacks that deceive you into signing malicious transactions? Your private key isn’t the only piece of the puzzle.

Hardware wallets are a must. Get one. But second, realize and be very vigilant over the websites you link to and the agreements you authorize. Double-check everything. Read more and learn how to create a separate “burner” wallet for your DeFi adventures. Imagine it like a decoy wallet. Instead of stealing from the main vault, let them steal from the decoy.

2FA: A False Sense of Security

Two-step verification, milli-second load time…fast is great, we get it—that’s wonderful for your email and social media. In DeFi, that’s akin to locking a padlock on a stagecoach door while the outlaws dig their way in from below. Since DeFi access relies on private key ownership rather than identity verification, traditional two-factor authentication offers little safeguard.

You see, the problem is that 2FA usually authenticates you, not the transaction. In DeFi, the transaction is what matters. If an attacker obtains your private key, they can fully circumvent 2FA.

Don't rely on 2FA as your primary security measure in DeFi. Instead, consider multisignature wallets, which use a set of different private keys to authorize a transaction. Consider it like requiring a few signatures to cash a very large check. Multisig wallets offer an added level of protection. So remember, even if you’re using keys management systems, they can still be compromised if the underlying keys themselves are vulnerable.

Token Approvals: The Silent Killer

Here is where it all gets exciting — and where everyone else gets taken to the cleaners. You authorize a DeFi application to use your tokens, then never think about it again. It’s the equivalent of handing a stranger a blank check – they can empty your bank account any time they choose.

Token approvals are a key part of DeFi, but they introduce a massive security vector. When you approve a smart contract to spend your tokens, you are usually giving it unlimited spending access. If that contract is compromised or becomes malicious, your money is vulnerable. Remember that recent $1.5 billion crypto theft? One of the projected causes was a front-end attack – abusing frontend vulnerabilities in token approvals!

Routinely check and revoke token approvals for apps you no longer use or trust. In addition to using Etherscan’s tool for seeing and manually clearing approvals, tools like Debank let you manage your approvals in bulk. And always set spending allowances. Never approve a smart contract to spend your entire wallet. Keep it only to what you truly require for the transaction. Just like setting a credit limit on a credit card shields you from accidentally spending more than you can afford. In this instance, it gets you spent about to!

Ignoring the Lessons of History

This one really is the dumbest of all. They get scammed, lose hundreds of thousands of dollars, and then… turn around and do it all over again! It’s comparable to getting thrown off a horse and then just jumping back on without any training in how to ride. The research found that most victims of DeFi-related scams took no action after being duped by the scheme. Even worse, some of them doubled down, pouring even more capital into other DeFi protocol.

Learn from your mistakes. And learn from other people's mistakes. The DeFi space is constantly evolving, so you need to be continuously educating yourself about new security threats and best practices. Subscribe to security blogs and follow security experts on Twitter, and find out what DeFi security communities are doing. And if you do get rugged, please don’t just shrug it off and assume that’s par for the course. Look at what happened, acknowledge the failures that caused it, and make real efforts to ensure it can never occur again.

If approached correctly, DeFi has the potential to be a powerful access tool for financial empowerment. It can help us to disrupt traditional finance and build a financial system that is more accessible and equitable. It's a dangerous place. It's your responsibility to protect yourself. Don't be a victim. How to Become a Smart, Educated & Careful DeFi User Approach it how you would the Wild West that it is, and you’ll find gold. Ignore these warnings, and you’ll be digital dust left for dead in the wake.