1. Poorly designed DApp

DApps are built using smart contracts, which consists of code - and code sometimes has bugs. The most reputable DApps have been thoroughly audited by third-party security firms, but many DApps have not been audited. This means there's a chance the DApp you're connecting to may contain a weakness that could be exploited by hackers - with the result that the funds you send to the DApp could be lost or stolen.

2. Malicious DApp

The risk here is the same as with a poorly designed DApp. The only difference is, with a malicious DApp, the code has been purposely compromised, usually in such a way that the DApp makers can steal funds.

The best way to avoid losing your funds to poorly designed and/or malicious DApps is to take the time to investigate the DApp maker and ensure that the DApp's code has been audited by a reputable third-party service.

3. Phishing DApp

Let's say you fully trust the 'ABC Finance' DApp. It has a solid team of developers behind it, and the smart contracts it is compromised of have been audited by two reputable third-party security firms. When you search for ABC Finance's website, imagine you accidentally click on a link that takes you to ABDfinance.com. This website looks identical to the ABC Finance website you're used to, but when you connect your wallet, you're unknowingly connecting to a malicious DApp. Any funds you send to the DApp, rather than earning you passive interest as you intended, are instead stolen by the 'phishing' DApp's creators.

The best way to avoid getting caught by a phishing DApp is to double check the URL of the DApp's webpage to ensure it is correct. Another tip is to check that the lock icon (🔒 ) appears in your browser's address bar preceding the website's URL.

Read more: What is WalletConnect? Learn about the bridge that connects your wallet to DApps and how to use it.