Escalating DeFi scams tarnishing the crypto yield farming market niche

From rug-pulling to fake presales, DeFi experts and novice traders alike are bleeding valuable Ether from these scams.

With DeFi creating a market segment where project initiation cost is near zero, rogue actors now have the perfect environment to continuously siphon funds from victims.

Instead of DeFi helping to democratize access to global finance, the emerging market niche is becoming overrun by scams.

As far as scams go, the ones seen in the DeFi space follow the same basic playbook.

With the help of "Moon boys," or paid shills with considerable Twitter followership, project creators get the word of mouth rolling about their supposed new DeFi "Gem." All these scams share the same premise: low market capitalization brought on by a limited supply of tokens guaranteeing huge returns for early adopters or around 1,000% gains.

"Spending the time to research is key, personally I spend up to six hours a day on research alone. Right now, the best way to avoid scams is by verifying facts - which includes looking at the smart contract code and GitHub repositories. This is the best part about DeFi as smart contracts are open-source and open to everyone to verify and validate."

Aside from the significant losses incurred by victims of these scams, the sheer volume of fraudulent activity is reportedly taking its toll on the DeFi market as a whole.

There is an emerging trend in the DeFi space that has seen the market transition from yield farming to "Ponzinomics," with rug-pulls and fraudulent presales becoming an everyday occurrence over the past few weeks.

"These scams are affecting people's interest in yield farming, which is the main draw for people since some farms promised unrealistically high returns not seen before. And with the interest and returns in yield farming decreasing due to people's fear of scams, the corresponding interest in DeFi in general is also losing steam."

Not every stakeholder shares the opinion that these DeFi scams are the death knell of the emerging crypto market.