How to start with crypto defi
This article describes a guideline about DeFi. It will describe:
What is DeFi?
Where to find DeFi projects?
DeFi risks involved
How to start with DeFi?
Handy DeFi tools
More DeFi Resources
What is DeFi ?
DeFi stands for decentralized finance and is a generic term for all projects that implement financial services, products or protocols on some blockchain. The applications are called DApp (decentralized app). These products are built with smart contracts which are programs on the blockchain that are secure, transparent, permissionless and secure.
The main advantages:
Permissionless (anyone can use it)
Trustless (no middleman needed)
Banking services (loans, mortgages)
Decentralized Exchanges (DEX),
Some known as Automated Market Makers (AMMs) use so-called liquidity pools and they facilitate trading without needing a direct counterpart to match the trade. Famous examples are UniSwap and
In short yield farming (also called liquidity mining) is making more crypto with crypto for example by lending your crypto’s or staking. You lock up your crypto and you earn yield. Yield farming is the strategy of moving your crypto’s around to get the best results. This can become very complicated.
In many cases it works with users called liquidity providers (LP) that add funds to liquidity pools (which basically is a smart contract that holds funds). The rewards are tokens that can be used in other liquidity pools and so on.
How to find DeFi projects?
There are a lot of sources where you can find defi projects. Here is a list of good resources:
Social channels (like YouTube, Twitter, Telegram, Instagram, TikTok, Reddit)
On the social channels you find a lot of influencers that talk about projects.
The DeFi space still remains a kind of “cowboy-land” in which there can be a lot of fraud and scam. It remains difficult to find the right and sustainable projects. Be aware of HIGH YIELDS, HIGH RISK !
Some of the most risks are:
An example is a fake project where they want you to sent crypto to another wallet address and they will invest for you. You get yield the first weeks, but after some weeks the sending stops and the site is taken offline.
Bad smart contracts
A Smart Contracts is the actual finance program on the blockchain, but this code can also be malicious after which they can take your crypto
This is a phenomenon where you invest in liquidity pools and the value of your liquidity is less then if you would have hold both tokens
Investing in crypto is also a lot of hype and emotion. You buy products at the top of the hype and suddenly it all collapses.
What do you need to start with DeFi ?
Before you can start with DeFi, you need to have a crypto wallet and crypto on that wallet. Then you can start with your first DeFi investment.
Before you can start with DeFi you will need a compatible crypto wallet and there are several types:
Browser extension wallets (like MetaMask)
Mobile wallets (like TrustWallet)
Get crypto on the wallet
The MetaMask wallet supports all kind of blockchain like the most popular ones like Ethereum, Polygon, Tron, Arbitrium, Binance Smart Chain (BSC). The steps to follow are on high level:
Register on Centralized Exchange (like Binance)
Buy crypto on the Exchange (for example BNB when you want to invest on BSC or ETH when investing on Ethereum)
Sent crypto to your Wallet (like BNB to your MetaMask)
Invest in your first DApp
Invest in your first project
As said already before there are a lot of blockchains that host DApps and there are a lot of sources where you can find those DApps.
A couple of years ago I started with Binance Smart Chain and PancakeSwap (PCS), just because the blockchain fees were (and still are) cheap compared to Ethereum and PCS was the most famous one.
I keep my current list up-to-date here: https://linktr.ee/rvdkimmenade
There are a lot of handy DeFi tools and I will list a few.
DeBank - Gives a nice overview of your projects. Note: it will not give an overview of all projects but usually the most well known projects are listed and you can add custom tokens as well.
CoinTool - Here you find all kind of tools for tokens. You can even create your own token!
VFat tools - Reading smart contracts and pools
Compounding calculator - Calculator to calculate compound yields
More can be found here: https://www.passiveincomewithdefi.com/defi-tools/index
Investopedia - Kind of encyclopedia about crypto
Cointelegraph - Crypto news and guidelines
CoinBureau - Great YouTube content
As always this is not financial advice! But just some crypto investment platforms I currently use and have experience with. Do your own research before investing and never deposit money you cannot afford to lose.
Feel free to ask me questions.
To sponsor / support me you can use my BNB wallet address: 0xf28404eeC38e9a7e1669Ac95D9CDD3664cbDB7c2
Website - https://www.passiveincomewithdefi.com/
All projects - https://linktr.ee/rvdkimmenade
Telegram group - https://t.me/crypto_and_defi
YouTube - https://www.youtube.com/c/PassiveIncomewithCrypto
Medium articles - https://medium.com/crypto-and-defi
Twitter - https://twitter.com/incomewithdefi
Thanks, happy days and be safe !