Whether it’s DeFi or NFT’s, the Ethereum ecosystem has enjoyed new mainstream adoption the past few months. Issues still remain on the complexity of using the Ethereum blockchain and smart contracts, however the use cases have definitely been increasing.
We will begin to explore different ways to use Ethereum on this blog. In today’s article, we will walk you through an easy 3 step process to getting started with DeFi. It’s easy to get overwhelmed with it all, so starting with an easy process is the best way to begin.
Before step 1, we would recommend downloading the Brave browser if you have not already. Brave is a blockchain powered browser that puts the power back in the users hands.They do not use surveillance on their users, load times are much faster, and uses 35% less battery. You can earn rewards using Brave in the form of $BAT token and they also have a VPN that you can upgrade to.
Remember to always download any applications from the direct source (usually their official website).
Step 1 – Download Metamask
To begin, we need a crypto wallet that we’re able to use in the DeFi ecosystem. Metamask is by far the most used wallet in DeFi. Most, if not all DeFi platforms integrate with Metamask. It is a decentralized digital wallet that acts as your bank to the DeFi world.
Download Metamask and go through the easy to follow instructions. It will ask you to create a password and will install onto your browser for easy access. Every Metamask wallet comes with a seed phrase in the security section. Never ever ever ever give that seed phrase to anyone or any application. If anyone gets access to that they can steal all the crypto in your Metamask wallet.
Step 2 – Deposit Ether
Once you have your Metamask wallet downloaded, you can now deposit Ether on it. Click the “Account 1” in the upper middle to copy your wallet address. That is where you want to send your Ether too. If you don’t already have Ether, then you can purchase some directly on Metamask or on an exchange like FTX.
You can deposit any other ERC-20 token as well like the stablecoin USDT. DeFi consists of a massive variety of smart contracts that can be used with many different cryptos, not just Ether.
For this example we will use Ether. We recommend depositing a very small amount to begin. An amount you will not be disappointed if you lost. It’s important to remember this is all brand new technology so bugs and human error are quite common. Also, all transactions involve a transaction fee called gas. Before making the transaction, Metamask will let you know what the fee will be. You can get an idea of ongoing rates at the ETH Gas Station.
Step 3 – Mint Dai
Now that you have your wallet and funds deposited, you can start to play around with different protocols. We recommend starting out by minting some Dai with MakerDAO. Maker is one of the first and most trusted DeFi platforms around. It’s a decentralized credit platform that support the creation of Dai. Dai is a stablecoin that is pegged 1:1 to USD. If it ever gets unpegged, the Maker algorithm will burn MKR tokens until Dai is pegged 1:1 again. It’s meant to act as a permission-less stablecoin for DeFi. Dai can be used in many smart contracts to earn yield or borrow other cryptos.
The best way to mint Dai is on the Oasis app. You will be creating a collateralized debt position, meaning you will lock-up Ether on the MakerDAO protocol as collateral and receive Dai in return. Just simply connect your Metamask wallet to the Oasis app and follow the steps. Dai can then be used for:
- A hedge if you think Ethereum will drop in price but you don’t want to sell your Ethereum
- Earning interest on your Dai holdings
- Paying for things using a credit card or wallet that allows you to buy things with Dai
When you want to get out of the loan, you simply send back the Dai and receive your Ether back. That Dai is now burnt by Maker. It’s important to remember that this is all happening with computer code. There isn’t a person to call if something goes wrong so make sure to be cautious and attentive to detail.
The future looks bright for DeFi and MakerDAO is one of the protocols leading the way.
Nothing I say is investment advice. Do your own research on everything you put real money into. Do NOT take anything of what I say as an endorsement or recommendation.
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