# What Are the Risks Associated with Smart Contract-Based DeFi Platforms? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

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## What Are the Risks Associated with Smart Contract-Based DeFi Platforms?

Key risks include smart contract bugs, which can be exploited by hackers leading to loss of funds, and governance attacks. Other risks involve economic exploits, where the contract logic is manipulated, and Oracle failure, leading to incorrect execution.

Regulatory uncertainty and high volatility of underlying assets also contribute to the risk profile.

- [What Are the Security Risks Associated with Smart Contract-Based Derivatives Settlement?](https://learn.greeks.live/path/what-are-the-security-risks-associated-with-smart-contract-based-derivatives-settlement/)

- [What Are the Primary Risks Associated with Smart Contract Bugs in a DeFi Derivatives Platform?](https://learn.greeks.live/path/what-are-the-primary-risks-associated-with-smart-contract-bugs-in-a-defi-derivatives-platform/)

- [What Is the Purpose of a Smart Contract ‘Audit’?](https://learn.greeks.live/path/what-is-the-purpose-of-a-smart-contract-audit/)

- [What Risks Are Introduced by Removing Traditional Intermediaries in Options Trading?](https://learn.greeks.live/path/what-risks-are-introduced-by-removing-traditional-intermediaries-in-options-trading/)

- [Why Is a Smart Contract Audit Important?](https://learn.greeks.live/path/why-is-a-smart-contract-audit-important/)

- [What Is a ‘Flash Loan’ Exploit?](https://learn.greeks.live/path/what-is-a-flash-loan-exploit/)

- [What Are the Key Security Risks Associated with Smart Contract-Based Derivatives?](https://learn.greeks.live/path/what-are-the-key-security-risks-associated-with-smart-contract-based-derivatives/)

- [What Are the Key Risks Associated with Deploying Complex Financial Smart Contracts?](https://learn.greeks.live/path/what-are-the-key-risks-associated-with-deploying-complex-financial-smart-contracts/)

## Glossar

### [Total Value Locked](https://learn.greeks.live/area/total-value-locked/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Collateralization ⎊ Total Value Locked, within decentralized finance, represents the aggregate value of crypto assets deposited in smart contracts, functioning as collateral for various protocols.

### [Regulatory Uncertainty](https://learn.greeks.live/area/regulatory-uncertainty/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Constraint ⎊ : Ambiguous or rapidly changing rules regarding asset classification or leverage limits directly constrain the design space for crypto derivatives products.

## Discover More

### [How Can a DeFi Protocol Be Secured against Both Oracle and Governance Risks Simultaneously?](https://learn.greeks.live/path/how-can-a-defi-protocol-be-secured-against-both-oracle-and-governance-risks-simultaneously/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Can a DeFi Protocol Be Secured against Both Oracle and Governance Risks Simultaneously?](https://learn.greeks.live/wp-content/uploads/2025/10/Emergent-Malleability-of-Atomic-Ledger-Structures-Highlighting-Embedded-Opacity-In-Decentralized-Financial-Primitives.webp)

DON + TWAP + Time-Lock + High Threshold (Layered Defense Strategy)

### [What Are the Risks Associated with Providing Single-Sided Liquidity in Certain AMM Designs?](https://learn.greeks.live/path/what-are-the-risks-associated-with-providing-single-sided-liquidity-in-certain-amm-designs/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Risks Associated with Providing Single-Sided Liquidity in Certain AMM Designs?](https://learn.greeks.live/wp-content/uploads/2025/10/Interlocking-Modular-Hardware-Aesthetic-Reflecting-Automated-Market-Maker-Liquidity-Pool-Dynamics.webp)

Risks include potential impermanent loss due to forced token swaps and smart contract or protocol-specific failures.

### [What Are the Risks Associated with High Funding Rates?](https://learn.greeks.live/path/what-are-the-risks-associated-with-high-funding-rates/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Risks Associated with High Funding Rates?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Autonomous-Organization-Governance-Token-Strike-Price-Mechanism-Visualization-High-Frequency-Hedging.webp)

High funding rates pose a risk to long positions by eroding profits and can signal an overbought market ripe for a correction.

### [What Is the Difference between Time-Based and Milestone-Based Vesting?](https://learn.greeks.live/path/what-is-the-difference-between-time-based-and-milestone-based-vesting/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between Time-Based and Milestone-Based Vesting?](https://learn.greeks.live/wp-content/uploads/2025/10/Galactic-FinTech-Abstraction-of-Volatility-Surface-Equilibrium-Beneath-Deep-Dark-Pool-Liquidity.webp)

Time-based releases tokens on a fixed calendar schedule, while milestone-based releases them upon achieving specific project goals.

### [What Are the Main Risks Associated with a 'Cash and Carry' Arbitrage Strategy in Crypto?](https://learn.greeks.live/path/what-are-the-main-risks-associated-with-a-cash-and-carry-arbitrage-strategy-in-crypto/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Main Risks Associated with a 'Cash and Carry' Arbitrage Strategy in Crypto?](https://learn.greeks.live/wp-content/uploads/2025/10/Geometric-Panel-Hinge-Mechanism-Illustrating-Interlocking-Digital-Asset-Derivatives-Structures.webp)

Risks include basis not converging, exchange default (counterparty risk), and margin call/liquidation on the short futures leg.

### [What Are the Security Risks Associated with the Two-Way Peg or Bridge Mechanism of a Sidechain?](https://learn.greeks.live/path/what-are-the-security-risks-associated-with-the-two-way-peg-or-bridge-mechanism-of-a-sidechain/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Security Risks Associated with the Two-Way Peg or Bridge Mechanism of a Sidechain?](https://learn.greeks.live/wp-content/uploads/2025/10/Advanced-Quantum-Entanglement-Protocol-Layer-Two-Scaling-Mechanism-in-Decentralized-Finance.webp)

Bridges are a major security risk because they centralize large amounts of funds and can be hacked, leading to massive losses.

### [How Are Smart Contracts Audited to Identify and Mitigate Security Risks?](https://learn.greeks.live/path/how-are-smart-contracts-audited-to-identify-and-mitigate-security-risks/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Are Smart Contracts Audited to Identify and Mitigate Security Risks?](https://learn.greeks.live/wp-content/uploads/2025/10/Hinge-Mechanism-Aesthetics-in-Decentralized-Finance-Protocol-Module-Interoperability-Visualization.webp)

Auditors manually review smart contract code and use automated tools to find vulnerabilities, then provide a report for developers to fix the issues.

### [How Is Counterparty Risk Mitigated in Smart Contract-Based Derivatives?](https://learn.greeks.live/path/how-is-counterparty-risk-mitigated-in-smart-contract-based-derivatives/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is Counterparty Risk Mitigated in Smart Contract-Based Derivatives?](https://learn.greeks.live/wp-content/uploads/2025/10/Beige-Surveillance-Casing-Aperture-Representing-Blockchain-Transaction-Monitoring-Mechanisms.webp)

Counterparty risk is reduced by replacing a trusted intermediary with transparent, automated code and mandatory on-chain collateral.

### [What Are the Risks Associated with Trading Perpetual Contracts?](https://learn.greeks.live/path/what-are-the-risks-associated-with-trading-perpetual-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Risks Associated with Trading Perpetual Contracts?](https://learn.greeks.live/wp-content/uploads/2025/10/Layered-Digital-Asset-Futures-Contract-Stacks-Representing-Liquidity-Pool-Stratification-and-Margin-Requirements.webp)

The primary risks in perpetual contract trading are liquidation, high funding rates, and counterparty risk.

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**Original URL:** https://learn.greeks.live/learn/what-are-the-risks-associated-with-smart-contract-based-defi-platforms/
