DeFi and High-Risk Dapps: What’s the Difference

DeFi and High-Risk Dapps- What’s the Difference
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Popular dapps can reward participants, but some come with a bit more risk involved.

On DappRadar, you will find various dapp categories, including DeFi and High-Risk. There are quite some similarities between these two types of dapps, but also some differences.  This article will explain the differences between DeFi and High-Risk dapps. 

Applications on the blockchain are also called decentralized applications, or dapps. These generally run using smart contracts, or pieces of software running live on the blockchain. Through a dapp discovery platform like DappRadar, you can be assured that you get access to the correct decentralized application, minimizing the chance of losing your crypto. 

However, both DeFi and High-Risk dapps have a strong connection with tokens and making money. But there are some crucial differences between DeFi and High-Risk dapps.

Check out the hottest DeFi dapps with DappRadar

Source: DappRadar DeFi Rankings

Characteristics of DeFi dapps

  1. DeFi dapps simulate financial services, including lending and exchanging money.
  2. Users can earn interest or yield by participating in liquidity provision, supporting the dapp’s financial services.
  3. DeFi dapps support a wide variety of tokens, possibly across different blockchain ecosystems.
  4. These financial dapps use high yield rewards to lure liquidity providers during their early stages. These early stages come with a higher risk of a rugpull. Rewards become more in line with established financial services as more users join the ecosystem. 

These are 3 DeFi dapps with a good reputation and lots of activity

Characteristics of High-Risk dapps

  1. Making money is the top priority of High-Risk dapps and their users, often using different tiers for different users. 
  2. Often High-Risk dapps implement a ponzi mechanic, having users invite more users and connecting financial benefits to that practice.
  3. No matter the time a High-Risk has been online, its status won’t change. Especially newer participants in the dapp’s ecosystem run the risk of losing their money.
  4. High-Risk dapps tend to have a very short lifespan, often a few months at best. But there are some exceptions. 

These are 3 High-Risk dapps that have been around for more than a few months:

The differences between High-Risk and DeFi dapps

By now the differences between DeFi dapps and High-Risk ones should be clear. Where DeFi dapps provide a financial service powered by the community, High-Risk dapps rely more on ponzi mechanics. The actual difference between these two types of dapps isn’t always as clear as presented here. Everybody who jumps into new DeFi dapps chasing high yield, or interacts with High-Risk dapps, runs a serious risk of losing their funds. Those who don’t want to run any financial risk when interacting with DeFi dapps, should only work with reputable DeFi dapps that have been around for a long time.

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