How does decentralized finance work?
Asked 3 years ago
Hey everyone. I'm quite keen on the idea of having sole control over my finance without an intermediary like the bank. However, I'm not really sure how this process works? Like, for instance, how do I get my money into DeFi, and can I make regular transactions as if I'm operating from a centralized bank account i.e., shopping? Thank you!
Josiah Makori
Tuesday, July 19, 2022
Unlike banks that depend on cashiers to facilitate customer transactions, DeFi leverages smart contracts built on blockchain networks to enable Peer-to-Peer (P2P) transactions. To use DeFi products and services, you need to hold some crypto, e.g., ETH. So, how do you put your money into DeFi?
First, sign up with a Centralized Exchange (CEX), like Coinbase, Kraken, or Binance, to buy crypto with fiat. These exchanges support various payment methods, including credit cards and bank transfers.
Secondly, download a web3 wallet like MetaMask or Trust Wallet, and transfer the crypto you bought in step 1 to them.
Thirdly, visit a DeFi DApp like Aave or Compound and link your web3 wallet.
After successfully linking your wallet, you can use the products and services offered by the DApp.
Remember your crypto is kept in your web3 wallet. Therefore, you can make regular transactions, like sending crypto to another user or paying for goods through your wallet.
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