Want to earn passive income through DeFi? First, understand these three major risks, or you might lose money quickly.

The most frightening is liquidation risk. If you use assets like BNB as collateral to borrow stablecoins, and the collateral value suddenly plummets, causing the collateralization ratio to fall below the liquidation threshold, the system will automatically auction off your collateral to repay the debt. This is not to scare you—such incidents have happened many times in history. The simple way to defend against this is: prefer to borrow less and set a more conservative collateralization ratio (above 150% is safer), leaving yourself enough buffer. Greedy borrowers who max out their loans are often the ones who get liquidated.

Second is the smart contract code risk. Although these protocols are audited by firms like Peckshield, who dares to say that all code is 100% bug-free? Fortunately, there are emergency mechanisms like Emergency Switch, which serve as the last line of defense.

Then there's the stablecoin depegging issue. Over-collateralized stablecoins are not directly backed by fiat currency, so in times of market panic, slight de-pegging can theoretically occur. While arbitrage mechanisms usually bring them back, this risk cannot be ignored.

Veteran advice: start small, get familiar with the liquidation process and interface. Treat this as a high-level financial tool, not a guaranteed profit investment product. Its advantage lies in efficiency, but efficiency and risk have always been twin brothers.