I recently experienced a mainstream stablecoin generation protocol, and after three days of testing, I ran into quite a few pitfalls. I want to uncover the truth.

When it comes to "annualized yield," this is the most easily exaggerated concept. Many projects include governance token rewards based on the current price and assume they can maintain this stability for an entire year. But these reward tokens are inflation assets— the larger the emission, the greater the pressure on the token price. The simple truth is—selling pressure is inversely proportional to output. To truly calculate sustainable returns, you need to look at the interest on loans and the risk-free returns from depositing stablecoins into large lending protocols. As for token rewards? Treat them as a lottery that might go to zero—don’t rely on them.

And then there's the word "decentralization." Don’t be fooled. The code is indeed open and transparent, and the lending logic is automatically executed. The problem is, the parameters that determine the entire system’s fate—such as which assets are accepted as collateral, how fees are set, and how much penalty is applied during liquidation—are still decided by governance votes. Especially in the early stages, voting power is often highly concentrated in a few hands. This can lead to poor decision-making or attacks. Whether your principal is safe depends, to some extent, on whether these people are rational and professional enough.

There’s also a more hidden risk: the chain reaction within the Lego system. For example, you put stablecoins into a yield aggregator, which then disperses the funds into ten different farms. If any one of these farms gets hacked, attacked, or has a vulnerability—this risk propagates layer by layer, ultimately hitting you. You’re not facing a single point of failure but the risk of the weakest link in the entire chain.

In short, the protocol itself might be very stable, but the yield chain you build could break with a single poke. True risk management starts with acknowledging that you don’t understand the complexity of all nested contracts. Simplify your approach—only deal with well-audited top-tier protocols—this is more important than chasing extreme annualized yields.