Liquidity Pooling. Part 2

While the liquidity pool model deployed by DEXes protects you from traditional counterparty and custodial risk, funds are still deposited to a pool that is effectively a temporary custodian of those funds, albeit a contract rather than an entity. If that smart contract is subject to bugs, failure, hacks, or exploits, funds can still be lost. Care must also be taken to avoid platforms with an admin key or other privileged access that can leave users vulnerable to rug pulls and exit scams. This risk is common across all decentralized platforms, of course, and not just limited to liquidity pools.