Welcome to Module 7 - Course 3 of Mission Web3. It’s time to embark on a DeFi adventure and have some real fun!
In this course, you'll learn how to get started with DeFi, set up a wallet, connect to DeFi protocols, and engage in popular DeFi activities. Additionally, we'll explore tips for discovering new DeFi opportunities and staying safe in this dynamic space.
Introduction to DeFi Protocols
DeFi platforms, also known as protocols, are the backbone of the DeFi ecosystem. Each protocol specializes in specific services, such as lending, borrowing, trading, and more. As a beginner, it's essential to start with platforms that align with your interests and goals.
When choosing a DeFi platform, consider these factors:
Total Value Locked (TVL): Platforms with a high TVL (liquidity) typically indicate trust and popularity within the DeFi community.
Security Audits: Look for platforms that have undergone professional security audits. Audit reports are often publicly available and provide insights into the security of the protocol.
Community Support: A strong and active community that discusses potential risks and issues is a sign of a secure platform.
It’s always helpful to join the community before you start engaging with any Web3 project. Learn what people are talking about on X, Discord, Telegram, and stay updated with the latest news.
Interacting with DeFi
In the very first module, you’ve downloaded Metamask, which is a popular wallet that allows you to interact with DeFi platforms easily.
Here's how to connect your Metamask wallet on DeFi platforms:
Open your Metamask extension.
Click on the icon in the top right corner to select the Ethereum Mainnet or another compatible network.
Visit the DeFi platform of your choice.
Look for a "Connect Wallet" or "Unlock Wallet" button.
A Metamask pop-up window will appear. Confirm the connection by clicking "Connect" or "Unlock."
Your wallet is now connected to the DeFi platform, allowing you to access various services.
DeFi lending platforms like Aave and Compound allow you to lend your digital assets to earn interest or borrow assets by providing collateral. Here's a quick overview:
Lending: Deposit your assets into a lending platform to earn interest. The platform uses your funds to provide loans to borrowers.
Borrowing: Deposit collateral and borrow assets. Your collateral is used as security for the loan.
⚠️ Wait: Always check if the website is safe before connecting your wallet or approve any transaction!
Staking Tokens in DeFi
Staking is a fundamental concept in DeFi that allows users to participate in various blockchain networks, secure these networks, and earn rewards in return.
DeFi platforms require liquidity to function efficiently. Liquidity providers (LPs) are users who lock their crypto assets in liquidity pools.
These pools consist of a pair of tokens, such as ETH and DAI, or any other tokens supported by the platform. LPs contribute to these pools and, in return, earn a portion of the trading fees generated by the platform.
To become a liquidity provider, you need to deposit an equal value of both tokens in a liquidity pool. For example, if you want to provide liquidity for the ETH/DAI pool, you'll need an equal value of ETH and DAI. This ensures that the pool remains balanced.
As users trade on the platform, they pay fees, which are distributed to liquidity providers. Your rewards are proportional to the liquidity you provide in the pool.
The more liquidity you contribute, the higher your share of the trading fees.
For this course’s task, you’re challenged to provide liquidity on Aerodrome, a DeFi protocol built on Base. You can stake liquidity to earn the native token AERO. The deeper the liquidity (TVL), the lower the slippage a pool will offer. LPs get AERO emissions, while veAERO lockers get the pool trading fees as an incentive to vote on the most productive pools.
Deposit liquidity on Aerodrome and start your DeFi journey!