# Economic red flags

Historical DeFi failures often originated from economic misalignment rather than code vulnerabilities.

Shift maintains a structured red flag registry derived from post-mortem analysis of prior incidents.

[Economic red flags](https://medium.com/@SHIFT_DeFi/red-flags-before-the-crash-how-shift-sees-defi-collapses-coming-81630277d6bf) include:

* Excessively high collateral factors
* Rapidly increasing borrow-to-supply ratios
* Governance systems vulnerable to low-cost takeover
* Algorithmic stablecoin exposure without hard backing
* Incentive structures that encourage reflexive liquidity withdrawal
* Oracle feeds susceptible to manipulation
* Lack of transparency in collateral backing or governance processes 

Identification of a red flag does not automatically exclude a protocol. Instead, exposure may be capped, additional triggers configured, or monitoring intensified.

Risk is quantified, contextualized, and managed — not ignored.

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