Explanation

Answer Example

To evaluate risks in a new DeFi protocol, I first review the smart contract code, either directly or using auditing tools like CertiK or OpenZeppelin, to identify potential vulnerabilities. Next, I assess the protocol’s tokenomics, including inflation rates and liquidity incentives, for sustainability. I also consider external risks like regulatory compliance and market volatility. For example, during my analysis of a yield farming protocol, I identified a high risk due to unstable tokenomics, which helped my team avoid significant losses. This structured approach ensures comprehensive risk identification and mitigation.