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How to invest in DeFI?

3 minutes

DeFi stands for decentralized finance. Enabled by Web 3.0 technology, it is a growing and exciting alternative to mainstream investment. DeFi revolution is taking over the world of finance. In five years, the total value locked (TVL) in DeFi increased from zero to $55B. At its peak in November 2021, the TVL in DeFi reached $106B. The number of users who invested their money in DeFi has surpassed 4.7 million

The purpose of DeFi is to provide investors with a more effective balance between risks and rates of return. Crypto projects offer enormous yields, sometimes hundreds and thousands %. Yet, investors can also lose everything in one day, just like in the case of the violent collapse of Luna and Terra USD. DeFi revolution has eliminated the risk of losing everything at once. At the same time, the historical rate of return for DeFi investments has been around 5-20%. This is the main reason why DeFi is so attractive to investors.

Where to start with DeFi: A brief guide

  1. Learn more about DeFi. Before putting your money into anything, you should have a good understanding of it. DeFi is an umbrella term for financial smart contracts, decentralized applications (DApps), and protocols. DeFi products include decentralized exchange (DEX), lending and borrowing markets, and tokenized physical assets. Investors earn interest by depositing their crypto using smart contracts.
  2. Create a digital wallet and buy crypto on the exchange. There are dozens of wallets such as MetaMask, Argent, or Coinbase Wallet. Other popular wallets include Ledger, WalletConnect, MyEtherWallet, Electrum, Mycelium, and Crypto.com. The choice depends on your preferred blockchain and platform. 
  3. Select your DeFI. DeFi Pulse offers a comprehensive list of available DeFi projects ranked by their TVL. CER.live ranks cybersecurity of 422 DeFi platforms. After shortlisting a few candidates, read a brief description about the project, visit their website, read their whitepaper, and just google any recent news related to the platform. See when was the last activity from this DeFi on their social media.

Make sure your DeFi platform is credible and secure

Security and credibility are two vital factors determining your investment’s long-term sustainability. We have prepared a brief list of essential things to do before making your final investment decision.

  • Check the security of DeFi protocol on CER.live. CER.live is the must-have companion for all crypto enthusiasts, especially those interested in DeFi. This website ranks DeFi projects by 12 indicators including security score, platform audit coverage, bug bounty score, insurance score, etc. In May 2022, CER.live cryptocurrencies security ranking was integrated into CoinGecko, the biggest crypto aggregation platform in the world. You can read more about the CER.live methodology and integration with CoinGecko here.
  • Look up the DeFi platform on CoinGecko or Coinbase. Pay attention to trading volume and any sudden drops in price/market cap.
  • Learn about the basics of cybersecurity. Educate yourself on cybersecurity to protect your financial assets from hackers and scammers.

Use DeFi revolution to your advantage. Be proactive with your investment decision. Use this list to determine whether a DeFi project is secure and credible.

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Table of contents

  • Where to start with DeFi: A brief guide
  • Make sure your DeFi platform is credible and secure

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