Getting Started with DeFi: Beginners Guide to Yield Farming

It’s an exciting time for decentralized finance – better known as DeFi.

In this resource, we’ll be walking you through how to get started, along with sharing reviews, guides, and links to helpful information to better inform your DeFi journey.

We’ll cover:

  • Using a non-custodial wallet to access DeFi
  • Swapping tokens via Uniswap
  • Lending crypto to earn interest
  • Yield farming to earn DeFi governance tokens

If you’re interested to stay up with the ever-evolving DeFi landscape, check out our newsletter! We share the top stories from each week every Friday along with commentary on the latest trend worth noting.

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Getting Started with DeFi

At it’s core, DeFi is most easily accessed using non-custodial wallets like Metamask, Coinbase Wallet and Argent. The key thing to keep in mind is that with these types of wallets, you are the sole owner of the assets being stored. For 99% of DeFi products, you will access them by connecting your wallet and interacting directly with the funds inside of them.

To use a non-custodial wallet, you will need to have a small amount of ETH to cover transaction fees.

Please note that the wallets mentioned below only hold Ethereum-based assets, meaning you should not try and send something like Bitcoin directly to it.

DeFi Wallets – Store Crypto & Access DeFi Projects

Here are our reviews on the wallets listed above. To learn about more wallets, check out our full top picks.

Argent

Argent is a mobile-first smart wallet allowing users to seamlessly access various DeFi products directly in-app.

Coinbase Wallet

Coinbase Wallet is another mobile wallet with easy DeFi onramps for lending on popular platforms like Compound and dYdX. Your Coinbase Wallet is separate from your Coinbase account.

MetaMask

MetaMask is the most popular desktop wallet allowing you to access 99.9% of all DeFi applications.

First Steps

Once you’ve got a web 3 wallet set up, the world of DeFi is at your fingertips.

Perhaps the most novel aspect of the ecosystem is the vast amount of DeFi tokens which can be exchanged, lent and borrowed across various platforms.

The best place to trade DeFi tokens in a permissionless fashion are DEXs like Uniswap.

Outside of simply swapping two assets, users can also pool that capital to receive a pro-rata claim on Uniswap’s 0.25% trading fees. We’ve included our tutorial on how to do this below, however, simply swapping two tokens is a good first step to get started.

Use a DeFi Exchange (DEX) to Swap Tokens or Pool Capital

 

Uniswap

Learn more about Uniswap and how to swap between any two ERC20 tokens.

Not sure what two assets to swap for?

We recommend starting out with ETH and stablecoins like DAI or USDC.

The reason for this is that most lending protocols offer the highest returns on stablecoin lending, and there are a large number of platforms which they can be used and loaned on.

DeFi Lending – Lend Crypto

Attached below are reviews on all the different places you can lend DAI or USDC, with some protocols – like Compound – offering users native governance tokens for providing liquidity to their lending pools.

 

Aave

Lend or borrow up to 20 different DeFi tokens.

Compound

Lend top DeFi tokens and earn COMP on top of industry-leading APYs.

Curve

Supply stablecoins to earn leading APYs along with CRV governance tokens.

dYdX

Earn interest on stablecoins while being able to trade ETH with up to 5x leverage.

What is Yield Farming?

Yield farming is a new meme popularizing the ability to put your capital to work to earn returns from various DeFi protocols.

We’re now seeing many projects offering liquidity mining incentives, or the ability to earn native tokens in exchange for using popular DeFi protocols.

While the mechanism for liquidity mining various across different platforms, the idea of supplying capital to earn double-digit returns has been sweeping the crypto industry by storm.

DeFi Yield Farming – Earn DeFi Governance Tokens

Here’s our guide to various yield farming opportunities along with instructions on how to get started.

Please note that yield farming comes with a large degree of unforeseen risk and should be treated with caution. When entering any of these positions, we recommend using Nexus Mutual to purchase smart contract covers to hedge your risk in the event of a black swan event.

Top DeFi Resources

Outside of all the platforms listed above, there are dozens of new protocols emerging each day.

To this end, we’ve created a suite of resources to keep up with top outlets, thought leaders and projects to stay up to date with the latest trends in DeFi.

For those looking for a synthesized recap of the latest stories from the past week, subscribe to our free newsletter!

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Top DeFi Newsletters

Looking for more information beyond This Week in DeFi? Check out these newsletters for more takes on DeFi trends.

Closing Thoughts

Getting started with DeFi can be daunting.

We hope that this guide can help you better navigate the first steps in an endless rabbithole of new financial primitives.

For questions, comments and ideas about how to improve this guide, message us on Twitter!

Until then, good luck and stay safe!