Success in DEX? Fast-growing crypto exchanges may hurt DeFi investors

With the rise of various meme-coins over the last year or so, a whole host of decentralized exchanges (DEXs) have continued to emerge and accrue massive sums of liquidity seemingly overnight. As a result, a number of security firms have started to call into question over the recent weeks regarding the overall security and transparency of these platforms.

For example, DEX ShibaSwap, which has been able to capitalize on the budding popularity of the style of Dogecoin (DOGE) with native token Shiba Inu (SHIB), was recently able to accrue a total value locked (TVL) of more than $1 billion within a day of its launch. This calls into question the DEX’s liquidity quotient, especially since the protocol’s design was given low marks by platform reviewer DeFi Safety.

The firm initially scored ShibaSwap’s native safety and security standards at a mere 3%, which is well below the platform’s minimum pass threshold of 70%. However, following an audit by Certik, a firm that has previously worked with others in the industry like Neo, Crypto.com and Ontology, DeFi Safety bumped up ShibaSwap’s score to 35%.

Solidity developer Joseph Schiarizzi recently issued a stern warning regarding the staking contracts of such untested platforms, a concern that was also reiterated by DeFi Watch analyst Chris Blec.

Blec stated that, if, for example, the migrate function of ShibaSwap’s smart contract is still under the control of a single individual, there is a possibility that the owner of the contract could choose to initiate a new “migration function,” allowing them to gain complete control of the platform’s token pool.

Users beware

To gain a better understanding of the safety — or lack thereof — of some of these new DEXs, Cointelegraph reached out to Red, a community moderator for the decentralized yield farming aggregator Harvest Finance. In his view, ever since the inception of initial coin offerings — and now yield farming — a whole bunch of newly launched projects…

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