10-Step DeFi Safety Checklist — How to Evaluate Any Passive-Income Platform Safely

Updated: November 2025 • Reading time: 10–12 mins

TL;DR: Use this checklist and scoring rubric (0–100) to decide if a DeFi or earning platform deserves your attention. Always start small, verify yield sources, and never skip the withdrawal test.

How to Use This Guide

This guide helps you assess DeFi protocols (lending, staking, vaults), CeFi apps (custodial yield), and automation tools. Score each criterion to calculate your own risk score out of 100.

SPI DeFi Assessment Rubric (0–100)

Each platform is scored across 10 categories. Add notes, assign weights, and sum the results for your total risk rating.

The 10 Steps to DeFi Safety

1. Verify the Founders

Start by checking who’s behind the project. Legitimate founders usually have public LinkedIn profiles, GitHub activity, or contributions to previous DeFi projects. If the team is completely anonymous with no verifiable code history, consider that a major risk factor.

2. Check Regulatory Standing

Does the platform list a legal entity, terms of service, or disclaimers? If it explicitly restricts certain regions, that’s actually a good sign — it means the project is aware of and attempting compliance, not avoiding it.

3. Audit the Smart Contract

Always look for completed audits from reputable firms like CertiK, Trail of Bits, or OpenZeppelin. Check the report to confirm vulnerabilities are marked “Resolved” rather than “Acknowledged.” Projects with multiple audits or bug bounties are safer long term.

4. Review Tokenomics

Analyze emission schedules, unlock calendars, and reward structures. Extremely high APYs often indicate inflationary emissions. If token rewards outpace actual yield generation, expect a price crash once hype fades.

5. Assess Liquidity Depth

Liquidity is your exit door. Check TVL trends, DEX pair depth, and withdrawal volumes. A healthy project maintains stable or rising liquidity and allows quick exits with minimal slippage.

6. Watch for Ponzi Indicators

Be cautious of platforms promising guaranteed daily ROI, forced compounding, or referral-heavy marketing. Sustainable platforms explain how yields are generated — typically through lending, staking, or revenue-sharing, not pure recruitment.

7. Evaluate Community & Transparency

Join their Discord or Telegram. Do moderators answer technical questions, or is it just hype and memes? Clear communication builds trust; censorship, vague answers, or deleted questions suggest internal problems.

8. Test Small Before Going Big

Always test deposits and withdrawals with a small amount first. Measure the time it takes for funds to appear and whether you can exit smoothly. This “withdrawal test” is one of the most important steps — many scams fail it immediately.

9. Track Performance Over Time

Create a simple spreadsheet or tracker to log weekly APY, fees, and updates. Sudden spikes in yield or missing updates often indicate risk. Consistent results and communication are good signs of stability.

10. Stay Updated & Reassess

Even strong platforms change over time. Reassess quarterly — check for new audits, governance changes, or liquidity drops. When a founding team leaves silently, that’s a red flag to consider exiting early.

Worked Example: “AlphaLend”

Let’s look at how a typical protocol might score using this system.

• ✅ Strong audits and multisig control (8/10)
• ✅ Clear yield from borrower interest (9/10)
• ⚠️ Moderate legal clarity, offshore registration (7/10)
• ✅ Transparent updates and deep liquidity (8/10)

Final Score: 84/100 (Trusted) — suitable for small-to-moderate allocation.

Recommended Research Tools

• DeFiLlama: Track TVL, growth, and chain data.
• CoinGecko: Review token liquidity and listings.
• Audit Databases: Find unresolved issues or repeated vulnerabilities.
• Etherscan / BaseScan: Verify contract ownership and transactions.
• SPI Research Stack: Combine alerts and performance tracking.

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