One of the main risks of smart contracts in DeFi is the potential for bugs or vulnerabilities in the code. Because smart contracts are executed automatically, any errors or vulnerabilities in the code can have serious consequences, such as the loss of funds or the inability to access assets. In addition, because smart contracts are immutable, once they are deployed on the blockchain, they cannot be changed or corrected, which means that any errors or vulnerabilities must be addressed before the contract is deployed.
To mitigate these risks, it is important to carefully review and test the code of a smart contract before deploying it on the blockchain. This can help to identify and address any potential issues, reducing the risk of loss or other negative consequences.
Smart contracts may be susceptible to security breaches and improper administration. Participant organizations or the network administrator will need a strong governance and change control process to deploy new or amend existing smart contracts. They will also need a robust incident management process to identify and respond to glitches in smart contract operations.