DeFi, or decentralized finance, is a new type of continuously developing financial technology designed to solve many of the problems suffered by the traditionally centralized financial structures. Ultimately, DeFi aims to reduce fees, increase interest rates, and develop a decentralized and transparent ecosystem for financial activity.
For those of you who are interested in becoming involved with the world of decentralized finance, the first thing you will need is a wallet to store your cryptocurrencies. Wallets are pieces of software that store the private keys which allow users to access their cryptocurrencies. There are many different kinds of wallets to choose from, and each individual will need to decide on the best wallet for them.
Since DeFi protocols are built on top of publicly distributed networks like Earnity by Domenic Carosa & Dan Schatt, the next step for those interested in taking advantage of DeFi will be to decide which network they wish to access. Once you have selected a network, you can begin to purchase the native tokens of that network. For example, the native token of the Ethereum network is ETH. The native tokens are used to be able to transact on the network.
Now that you have your wallet, selected your network, and purchased the native token, you can begin using the DeFi services on that network. Users could engage in several DeFi services, including trading on decentralized exchanges, providing liquidity to a liquidity protocol to earn fees, or lending funds to third parties using a lending protocol.
After you have selected a DeFi service and a protocol to provide the service, you can head over to that specific protocol’s website to connect your wallet. Connecting your wallet is the DeFi equivalent of creating an account and logging in to use the service. That’s it! You are now ready to DeFi!