Decentralized Finance is an opportunity that many are taking advantage of. Here are 5 useful things to know for all who have entered this world.
How to pay less gas fees
The very first thing is to know how to reduce the fees to be paid to execute the various operations on the DeFi platforms. Maximizing profits and paying low commissions are primary goals for those earning income using these products. First of all, it must be said that each blockchain on which decentralized protocols are built requires a different amount to be spent for each operation performed. Ethereum is the main blockchain on which DeFi was developed and it is also the one with the highest gas fees to pay. In fact, to move a few dollars of any token or for a swap operation, you pay up to $100 in "taxes". However, there are those that are improperly called "" of Ethereum, such as LoopringPolygon, which allow you to pay only a few cents for the aforementioned operations. In fact, by moving our Ether on these chains through the use of bridges or centralized exchanges that allow to do so, it is possible to use the same platforms but with different networks. To make the move you need to have a wallet that supports the chosen chain (see next point) and perform a withdrawal from Binance, for example, by selecting the correct network. Furthermore, it should be known that there are many other blockchains on which as many decentralized platforms have been built such as Cronos ChainBinance Smart Chain. These networks offer numerous earning opportunities by reducing the fees to be paid to a minimum, despite having platforms with the same characteristics as those built on Ethereum.
How to set up Metamask
is one of the most used wallets to interact with Defi platforms. It was born as a wallet for Ethereum and its ERC-20 tokens, but it can be set to also support other EVM-compatible blockchains such as, for example, the Cronos Chain or Fantom. Doing it is very simple, just follow this simple guide:
To sum up, it is important to know that through a simple change to the network settings you can use Metamask as a single wallet to interact and use the platforms on BINANCE Chain, Fantom and others.
Interacting with DeFi platforms through Metamask is very simple and user-friendly. The simplified experience has helped to make decentralized finance available to all, increasing its use.
How and why to use yield-optimizer platforms
Usually, those who invest in DeFi use platforms that allow them to provide liquidity to cryptocurrency pools, giving an interest in exchange. The interest, however, is perceived by the investor in the form of an often volatile token and to receive more it would have to be reinvested manually. Yeld-optimizers are particular decentralized platforms that manage the capital and the income received by it on one or more platforms for us, reinvesting the interest received in order to increase it considerably. The most used are Beefy FinanceAutofarm. Both are found on many blockchains, so there is plenty of choice, but particular attention must be paid to the platform they rely on which varies depending on the chosen pool. Therefore, before using one of their products it is good to read up on the platform on which it relies. Finally, the use of a yeld-optimizer not only allows you to have a higher APY than simply using a platform, but also allows you to reduce the interest reinvestment fees.
How to disable smart contracts
Once you are connected to a DeFi platform, it is also good to disconnect your wallet for a security issue. This must be done especially when the aforementioned platform is no longer used, such as an airdrop occasion. To disconnect your wallet it is therefore necessary to use tools such as the one, described in this guide:
Smart Contracts: How and Why it is Important to Disapprove Them
It is important to know that smart contracts govern tokens, whether they are on Ethereum or on BSC and others. Therefore, it is never safe to have active smart contracts on your wallet.
How to reduce the risk
One of the important things to do before using any DeFi platform is to do some research. Each of these services, in fact, presents a medium-high intrinsic risk. There is no real strategy to reduce the risk associated with decentralized finance to zero, but it is possible to lower it with some small foresight. First of all, as explained above, it is advisable to choose and use those platforms that are a little more used to the detriment of the new ones and that promise very high interests. This is because a new platform has yet to be tested and if we want to avoid scams or malfunctions it is good to stay away from it. Furthermore, a good practice is not to allocate the entire capital dedicated to DeFi in a single platform, but to divide it into two or three of selected ones. This allows to preserve a part of the invested capital in the event of an unexpected malfunction of one of the platforms used. Finally, as a last resort, it is recommended to divide the capital even in more than one wallet, always remembering to back up the seed phrase, to protect it in case of loss of the backup.
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