Crypto and DeFi 101: Benzinga’s Intro to Blockchain

Contributor, Benzinga

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Interested in buying cryptocurrency but don’t know where to start? From onboarding cash into crypto to DeFi yield farming, we’ve got you covered. Our guide starts from square 1, so no prior experience is necessary to benefit from our guide. If you’re already familiar with buying cryptocurrency, feel free to skip around the page to find tutorials that match your interests. 

With volatile prices, complex user-interfaces and buzzwords everywhere, the blockchain industry can be intimidating. Our goal with Crypto 101 is to teach you how to utilize the capabilities of blockchain technology as a financial instrument, diving deeper than just buying and holding digital assets on an exchange.

Most investors are aware of major cryptocurrencies like Bitcoin and Ethereum, but few understand the robust ecosystem which is the blockchain industry and how to use this to their advantage.

Did you know that token airdrops, staking, lending and liquidity provision are all ways you can earn money with cryptocurrency? What’s more, you can do all of this anonymously and securely right from your cryptocurrency wallet. It’s not uncommon for investors to make over 25% annual interest on top of their cryptocurrency investments!

What is Bitcoin?

Bitcoin was the 1st public blockchain to reach the masses, and it’s the most widely adopted cryptocurrency on the market. Initially seen as a peer-to-peer payment system, Bitcoin operates without a centralized 3rd party. Instead, Bitcoin miners located across the globe power Bitcoin’s decentralized network.

Today, Bitcoin is seen more as a store of value than a payment system. With higher fees and slower transaction times than most payment systems, Bitcoin isn’t the best cryptocurrency option for payments. Since Bitcoin has a finite supply (21,000,000) and mainstream adoption, it makes for a great store of value, and some investors speculate it will replace gold within the decade.

What is Ethereum?

Contrary to popular belief, Ethereum and Bitcoin are not competitors. In reality, these digital assets serve very different purposes. The underlying technology Ethereum uses allows for code to be uploaded to its blockchain (known as smart contracts) that can perform financial functions that were previously only done through centralized 3rd parties like banks. Think of Ethereum as a global computer, which developers rent space on to run their applications.

Smart contracts are the backbone of the DeFi (decentralized finance) ecosystem. There’s already over $50 billion of assets locked in smart contracts on Ethereum. This number continues to grow as investors realize the potential for earning cryptocurrency through DeFi platforms like Uniswap, Aave and Compound

What Are Smart Contracts?

Smart contracts are arguably the most important technology in the blockchain industry. Smart contracts are the backbone of DeFi, and decentralized applications like Uniswap, Compound and Aave are smart contracts at their cores.

What makes smart contracts unique is that they live and execute on the blockchain, giving them the immutability and security benefits of decentralized technology. Also, smart contracts have their own cryptocurrency addresses, so they’re able to hold custody of funds.

You can think of smart contracts like a vending machine –– there’s no intermediary between you and the candy bar, and the code executes a function after it’s given inputs.

Since smart contracts can store digital assets, they’re capable of operating similarly to a bank. However, there’s no central entity that needs to control the operation of smart contracts, adding a never before seen level of security and scalability to asset management.

Onboarding Cash to Cryptocurrency

If you’re completely new to cryptocurrency, the 1st step you’ll need to take is purchasing crypto. The easiest way to onboard your hard earned cash to crypto is with a centralized exchange; Coinbase, Gemini and eToro are all great options.

Setting Up a MetaMask & Using a Hardware Wallet

Setting up a MetaMask account is critical for anyone looking to put their cryptocurrency to work. Anyone who owns Ethereum can be earning interest on their assets, and there are several ways to do so. MetaMask is a cryptocurrency wallet that allows you to connect to DeFi programs, letting you put your assets to work.

Make sure that you save your seed phrase that MetaMask gives you when generating a crypto wallet. This is the only way to access your crypto if you lose your laptop that your wallet is on. Remember, not your keys, not your crypto!

How to Use Decentralized Exchanges (DEXs)

Using a DEX to trade cryptocurrency is a must for many cryptocurrency investors. Decentralized exchanges offer better security, more accessibility and a higher variety of altcoins to trade. Once you’ve set up a MetaMask, DEXs are actually quite easy to use!

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