The DeFi sector transformed from a niche concept to a multi-billion dollar industry that offers independence from banks and potentially high returns. Traditional financial services offer customer support hotlines to report lost funds but cryptocurrency transactions provide no such support because once funds disappear they cannot be recovered.

I directed a research study that surveyed close to 500 DeFi users to find out why they frequently encounter these risks. Spoiler: It’s not just about tech-savvy. Even experienced investors make shockingly simple mistakes. This summary presents our findings and shares strategies to protect yourself.

Mistake #1: “Blockchain = Bulletproof Security”
Numerous investors expressed their trust in DeFi because they believed blockchain technology to be unhackable though blockchain transactions remain secure through decentralization while applications built on them can still be vulnerable.

Smart contract bugs: Thieves exploited vulnerabilities in self-executing code to steal funds from Poly Network in a $600 million hack.

Front-end attacks: Cybercriminals gain control over a platform’s website to transfer your cryptocurrencies to their accounts.

The fix: Research projects thoroughly. Audit smart contracts through platforms like CertiK or DeFiLlama to evaluate security scores.

Mistake #2: Securing my private keys means I won’t experience any issues.
In principle holding your private keys yourself represents a safer approach than leaving cryptocurrencies on exchanges. But 63% of users we surveyed stored keys in risky places: cloud notes, texts, even Post-its. The situation is worse because only 9% of users opted for hardware wallets such as Ledger which represent the top standard for offline key storage.

The reality: A malicious DeFi app can drain your funds even when your keys remain secure.

The fix:

Buy a hardware wallet (
50
–
50–150).

Never share keys or seed phrases—ever.

Mistake #3: Blind Faith in Two-Factor Authentication (2FA)
57% of surveyed users reported that two-factor authentication made them feel secure. But here’s the kicker: Two-factor authentication does not function in decentralized finance platforms the same way it operates on Coinbase.

DeFi wallets operate through private keys as opposed to login credentials. When a hacker obtains your key no security measure from 2FA will be able to protect you.

Phishing links from fake Discord “support” teams enable scammers to get around 2FA protections.

The fix: Utilize multisig wallets (for example Safe) that demand multiple confirmations to process transactions.

Mistake #4: Ignoring Token Approvals
DeFi applications request endless access rights to your digital tokens. Users typically approve permissions and then move on until they realize a compromised app has stolen their money.

A mere 10% of investors consistently removed their unused approval permissions.

Default “unlimited” allowances let attackers steal everything.

The fix:

Use Revoke.cash to review/remove approvals monthly.

Establish spending limits such as $500 to prevent unlimited access to your funds.

Mistake #5: Repeating the Same Errors After a Hack
You would assume people would improve their security after they lost cryptocurrency. Wrong.

26 percent of scam victims failed to implement any safety measures.

A 16% portion of users increased their investments in high-risk projects.

One user who lost $4,700 shrugged: Despite experiencing financial loss through DeFi scams, some users maintain their trust because it once generated profits for them.

The fix: Treat security like a part-time job. Stay updated through DeFi security blogs and participate in online groups such as Reddit’s r/CryptoCurrency while remaining doubtful about promises of “guaranteed” returns on investment.

How to Protect Yourself: A 60-Second Checklist
Use a hardware wallet for large holdings.

Revoke token approvals monthly.

Stick to audited platforms (check CertiK).

Every direct message should be treated as a scam because real projects will initiate contact with you.

Never invest more than you can lose.

The Bottom Line
The DeFi industry has matured beyond its early chaotic days but remains full of danger. As one interviewee put it: Owning control over your finances requires you to take action to protect them.

Stay safe, stay skeptical, and remember: Your suspicious mindset serves as your greatest protection in the cryptocurrency world.

Got hacked or have tips? Submit your story here so it becomes a learning tool for others.