What’s DeFi and how to get started in it?
The decentralized finance sector is a relatively new trend and technology in the cryptocurrency industry that allows users to utilize decentralized financial solutions like banking, deposits and lending. Everything on DeFi platform works with the usage of automated smart contracts without any third party. Users on the platforms have almost full control over their funds.
Decentralized finances can be utilized by anyone due to their non-custodial nature and general availability. The only barrier between DeFi and the general users is the obligation to own cryptocurrency in order to use decentralized financial platforms.
Decentralized financial systems are built on top of smart contract solutions which are basically automated rules that are being executed on the financial blockchain platforms. Smart contracts have been widely used in the cryptocurrency industry. For example, back in 2017, ICOs were running on the smart contract technology providing customers tokens for participating in the initial offerings. Blockchain technology allows us to utilize those contracts as we wish and it was the reason for DeFi ecosystem to be built.
How to use DeFi platforms and protocols?
Every DeFi platform is tied to a specific chain like Ethereum or Binance Smart Chain (BSC), for that matter, it’s important to choose the network that you are willing to work with first. Each and every chain has it’s advantages and drawbacks. For example, Ethereum chain is the most popular one which means most of the DeFi projects are built on it. But on the other hand, sometimes you have to pay ridiculous fees in order to make one transaction.
Some protocols and platforms support various blockchains simultaneously. MetaMask extension allows you to work with both Ethereum and BSC chains in one app. Extensions like MetaMask allow you to access your funds through your browser and then connect your wallet to the platform directly. But before using MetaMask make sure to have a cryptocurrency wallet with Ethereum or BNB on it. You can read about the ways of buying and storing cryptocurrency on FinStrategy website.
MetaMask wallet extension is your go-to app for using DeFi services since without it you won’t be able to directly connect to the platform. There are other solutions on the crypto market besides MetaMask but there is no need to use something else when the best and most popular solution is out there.
Almost every DeFi platform has a “pop-up” window with a big “connect” button that allows you to join the platform’s network. Your wallet acts as your own personal account on the platform so you don’t need to put in your e-mail address or create a new account. But make sure to have the needed funds on your wallet before connecting to the platform. You won’t be able to use DeFi services and earn rewards without having the needed coins in your wallet.
Once you’ve selected a wallet or application that you are going to use in order to join DeFi you can connect your wallet to a chosen platform. After logging in to the platform you choose the way of making your crypto work for you: provide liquidity, lend or trade.
Decentralized Finance platforms allow you to passively make money by investing your funds in various protocols and receive rewards for providing an ability for others to trade on non-liquid trading pairs or get a loan.