You are interested in Crypto and DeFi? Do you want to invest or trade successfully? DeFi and Crypto are the future of the financial market. Decentralized finance solutions are becoming more and more popular. However, the financial world can be very confusing – for beginners and even for the more experienced. To help you know exactly how, when, and where to invest wisely, we will tell you how to work with DeFi and Crypto.
What should you pay attention to in the world of cryptocurrencies? What should you invest in and what shouldn’t you invest in? When you begin to explore the Open Finance Movement and decentralized blockchain networks, you face questions upon questions.
The more the internet develops, the greater the range of financial concepts, cryptocurrencies, and alternative digital options. With our five tips, you will get the best overview of DeFi and Crypto, enabling you to invest successfully and, of course, make profits!
Before we start – what is DeFi and Crypto?
Decentralized finance is:
- An open alternative to long-established financial systems
- Accessible to everyone with an internet connection
- Based on blockchain and smart contracts
- Independent of banks, brokerages, or other third parties
- No need to share your identity to use DeFi
Decentralized finance (DeFi) is an alternative to the long-established financial system. The difference: Unlike the traditional financial system, DeFi does not require a third-party – banks or brokerages are not necessary. In DeFi you can borrow, save, invest, and trade products.
DeFi is available to everyone, as it is publicly located on a decentralized blockchain network. This allows people to interact with other users, to buy, sell, lend or borrow products on a software, rather than interacting with a company or a bank. Most DeFi-applications are based on the platform Ethereum.
Blockchain is the basis for cryptocurrencies of all sorts. DeFi also uses smart contracts that allow financial functions and automated agreement terms between users, for example between buyers, sellers, or lenders. To use DeFi, you do not need to enter your address or ID, it is open for everyone to use.
What can you do in DeFi?
DeFi offers many possibilities to earn money in the short or long term. You can send money around the globe, earn interest by lending, exchange tokens, and more.
- Borrowing – without the influence of middlemen
- Payment services – decentralized payment services between two parties
- Exchanges – low fees for trading digital assets
- Lending – lend tokens from borrowers
- Yield Farming & Liquidity Mining– increase your tokens by depositing and lending
1. Be prepared for the DeFi market
As already mentioned, DeFi is open to everyone with an internet connection. Different from other platforms, there is no need to share your address or identity. But how can you invest, sell, buy, and trade in DeFi?
In order to start your success in this new finance system, you need a wallet – but not the one in your pocket or handbag. You will need a cryptocurrency wallet that is suitable for the protocols used in DeFi. In these wallets you store your own funds. These assets are only yours, no one else has access to them.
2. Borrow and lend
As the DeFi world functions without banks, there is no credit check or approval of a loan needed. Smart contracts are the middlemen between users. Borrowing or lending money is the best way to invest money at interest. You can act as your own bank and borrow your money at a favorable rate.
Lending and borrowing work the same way as with traditional financial institutions: The lender deposits his coins in the protocol and receives interest through the loan which the borrower pays.
3. Only invest in trusted projects – check the project
Be aware of frauds or scams – even in the digital world, there is a risk of investing in projects that scammers use to obtain people’s interest. Since the digital financial market is becoming more popular, scammers find clever ways to take advantage of you.
You should always check the project. Possible ways to find out whether a project is legit or not are the following:
- Purpose: What is the purpose of the project? Is it new, innovative or does it contribute to the DeFi space?
- Audits: Is the project audited? Audits are used to ensure that the code is safe. That’s why you should check this first.
4. Prices rise and drop fast
Watch out for rapidly dropping and rising prices. When trading, you should always keep the volatility of markets in mind. Cryptocurrencies and the DeFi world are unpredictable: projects can grow, tokens can gain value – but the next day the market may look totally different.
This is why you should be aware of the volatility. Knowing about the inconstancy can prevent or, at least, minimize unpleasant surprises.
5. Consider gas fees
Have you ever heard of gas fees and gas prices? For every transaction, you will pay a specific amount of money – the gas fees. You should always include this fee in your calculations and plan ahead when thinking about executing truncations.
To gain a deeper insight into decentralized finance, take a DeFi and Cryptocurrency online course. The online course of Teach me DeFi will help you make wise investment decisions. That way you not only invest safer, but you will also invest more successfully. The course is perfect for beginners and those who already have experience with cryptocurrency.
You will learn the basics of decentralized finance and will be provided with essential tools and useful apps for your DeFi and crypto success.