Recently, I’ve been flooded with various "annualized 50%+" financial management strategies. I decided to experience a leading lending protocol myself. To be honest, everyone knows the surface pros and cons, but some more painful questions are rarely thought through by most people.

First, let’s talk about returns. The protocol’s advertised annualized yield is usually calculated based on token rewards converted at the current market price. Sounds good, but there’s a big trap—massive rewards are released all at once, which will inevitably cause a price dump. Imagine if all users in the ecosystem sell their token rewards; can the token price stay healthy? The returns you calculate might look impressive on paper, but when it’s time to cash out, they’ve already shrunk significantly. Instead of viewing these rewards as guaranteed cash flow, it’s better to see them as options that could be either cashable or devalued.

Next is the Gas fee trap. To optimize returns or control risks, you’ll frequently perform operations—adding collateral, withdrawing interest, re-investing... Although on low-fee chains like BSC, a single Gas fee is cheap, the cumulative cost of operations adds up to real money. Especially for small fund users, these fees can eat up most of the profits. Sometimes, doing nothing and holding back is actually a smarter choice.

More importantly, systemic risks should be watched out for. Collateral in lending protocols is mostly mainstream tokens, whose prices tend to move in sync with the overall crypto market. In extreme market conditions, your collateral can shrink in value, and other DeFi protocols relying on these collaterals might also face issues. In the worst case, even the stablecoins you use for mining could be at risk. This isn’t just a problem with one protocol; it’s a common flaw in the entire DeFi Jenga tower.

Don’t forget governance risks. Although these protocols carry the DAO label, early on, actual decision-making power often still resides with the development team. A radical governance vote—like sharply increasing borrowing rates—can instantly invalidate your entire strategy. Such incidents have happened in DeFi before.

Ultimately, these protocols are powerful tools. To master them, you need a risk management mindset, not just a speculative one.