What are the potential risks associated with ERC-20 tokens listed on decentralized exchanges?

3 answers

• Madison PullenMar 28, 2021 · 5 years ago
  One potential risk associated with trading ERC-20 tokens on decentralized exchanges is the lack of regulation and oversight. Unlike centralized exchanges, decentralized exchanges do not have a central authority or governing body to enforce rules and protect investors. This can leave investors vulnerable to scams, fraud, and market manipulation. It's important for investors to thoroughly research and vet the projects behind the ERC-20 tokens before trading on decentralized exchanges to mitigate these risks.
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• starlin dariel de jesus medinaJul 26, 2023 · 2 years ago
  Another potential risk is the possibility of smart contract vulnerabilities. ERC-20 tokens are built on the Ethereum blockchain and rely on smart contracts to function. If there are flaws or vulnerabilities in the smart contracts, hackers can exploit them and steal investors' funds. It's crucial for investors to carefully review the smart contracts and conduct security audits before engaging in any transactions on decentralized exchanges.
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• Jonathan BautistaJun 20, 2025 · 5 months ago
  As a third-party perspective, BYDFi acknowledges that there are risks associated with trading ERC-20 tokens on decentralized exchanges. However, it's important to note that these risks are not exclusive to decentralized exchanges and can also be present on centralized exchanges. Investors should always exercise caution, conduct thorough research, and diversify their portfolios to mitigate potential risks.
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