βœ–οΈDEX problems

Limited returns for liquidity providers

Trading fees on decentralized exchanges (DEXes) typically yield APRs seldom surpassing 10–15%. Pools with the highest trading volumes attract numerous providers, resulting in each receiving only a fraction of the collected fees β€” a sizable pie divided among a vast crowd. Conversely, smaller pools, while less crowded, suffer from low volumes, leading to meager fee collections.

Farming rewards fail to offset impermanent loss

Although farms may tout high APRs initially, these rates swiftly diminish. Additionally, token prices often plummet during bear markets. Consequently, yield farmers who deposit funds in farms inevitably incur losses, despite the seemingly attractive APRs.

Farming token hyperinflation

In an effort to entice yield farmers, projects offer exceedingly high farming rewards in the initial weeks. However, most farmers opt to sell their rewards, triggering a significant dump. This results in tarnished project reputations, irrespective of the product's quality.

Difficulties in a bear market due to a lack of profit

Other projects may face profit-related challenges during bear markets or crises, ultimately leading to project closures.

Vulnerabilities to hacks and exploits

DEXes frequently fall victim to exploits, leading to user losses. Protocols often refrain from compensating users, asserting that utilizing DeFi platforms entails inherent risks.

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