When it comes to DeFi security, most people think of news about hacker attacks and stolen funds. But to truly understand why these incidents happen so frequently, you need to look at the technical, economic model, and human operational aspects together.

Unlike traditional finance, the Achilles' heel of DeFi mainly lies in two areas: once smart contract code is on-chain, it cannot be changed; and whether the economic design behind the protocol can really withstand scrutiny.

**Smart Contract Vulnerabilities — The Main Source of DeFi Risks**

Losses caused by technical vulnerabilities are often the biggest. Among these vulnerabilities, the most notorious is the Reentrancy Attack.

Reentrancy attack sounds complicated, but the principle is simple: a contract calls an external contract first, and before its own state (such as account balances) is updated, the attacker exploits this gap to repeatedly call the original contract, draining the liquidity pool. The famous hack of The DAO happened exactly like this, resulting in losses of over $50 million.

But even harder to defend against than reentrancy attacks are logical bugs. These are not basic syntax errors during coding, but design flaws—such as improper permission settings, inadequate input validation, or unexpected execution paths caused by interactions between complex protocols. Without extensive audit experience and comprehensive stress testing, it’s difficult to identify such issues.

Improper permission control issues may seem simple, but they have caused many DeFi projects to stumble. Attackers exploit permission vulnerabilities to directly manipulate core functions, often catching project teams off guard.