Common Risks with Dapps

The following are some common risks you should be aware of when interacting with dapps. This list is not exhaustive, so please be careful and do your own research. Coinbase is not affiliated with, and does not endorse these dapps. Coinbase is not responsible for funds lost resulting from your interactions with dapps, including due to the risks described below. 

Dapp Illiquidity

Low liquidity within a dapp can make it difficult to buy or sell tokens at your desired price. This can lead to high slippage (the difference between the expected price of an order and the price where the order actually executes) which can cause partial loss of funds when executing a trade. 

There is no way to guarantee that a Defi protocol, DEX, NFT marketplace, gaming platform or any other type of dapp will offer sufficient liquidity for you to trade your digital assets without incurring high slippage. 

You can use 3rd party resources like DappRadar, CoinMarketCap and CoinGecko to identify which dapps or tokens currently have the most liquidity based on their trading volumes. 

Trading volume is the total amount of cash or crypto exchanged between buyers and sellers for a particular token. The higher the trading volume, the more liquid the token. 

Coinbase does not endorse or verify the trading volume metrics provided by these 3rd party resources. Please do your own research to ensure that you are receiving accurate and timely information.

Dapp devaluation or loss / Dapp security breach or failure 

Other risks that could result in devaluation of tokens or loss of funds include: changes in market conditions that result in the price of a token declining, loss of funds due to slippage when executing a trade, or loss of funds due to technical issues such as a smart contract being hacked or a bug being discovered in a dapp or token. 

Dapp Fraud 

This includes loss of funds due to phishing incidents such as fraudulent emails, direct messages or links sent from bad actors with no affiliation with Coinbase, or interacting with a malicious dapp that allows the creator to steal funds.

Visit our help article - Identifying and reporting scams for more information about how to keep your funds safe when interacting with Dapps.