DeFi Getting Started: Complete Beginner Guide
Step-by-step guide to getting started with decentralized finance. Learn about lending, staking, yield farming, and DeFi protocols.
What is DeFi?
Decentralized Finance (DeFi) is revolutionizing how we think about financial services. Instead of relying on banks and intermediaries, DeFi uses blockchain technology and smart contracts to provide services like lending, borrowing, trading, and earning yield directly between users.
If you're new to crypto, start with our crypto investing basics guide, and familiarize yourself with Ethereum – the blockchain where most DeFi protocols operate.
Key DeFi Benefits
- Permissionless: Anyone with internet access can participate
- Transparent: All transactions are publicly verifiable
- Non-custodial: You control your own funds
- 24/7 Operation: No business hours or holidays
Getting Started with DeFi
Step 1: Set Up a Wallet
You'll need a non-custodial wallet like MetaMask, Trust Wallet, or Coinbase Wallet. Learn more in our wallet creation guide.
Important: Write down your seed phrase and store it safely. Never share it with anyone.
Step 2: Get Some ETH
Most DeFi protocols run on Ethereum, so you'll need ETH for transaction fees (gas). Buy ETH from an exchange and transfer it to your wallet.
Consider using Layer 2 networks like Arbitrum or Optimism for lower fees.
Step 3: Connect to a Protocol
Visit a DeFi protocol (like Aave, Uniswap, or Compound) and click "Connect Wallet." Your wallet will prompt you to approve the connection.
Step 4: Start Small
Begin with a small amount you can afford to lose while learning. DeFi has risks including smart contract bugs and impermanent loss.
Types of DeFi Services
đź’° Lending & Borrowing
Deposit crypto to earn interest, or borrow against your holdings as collateral.
Popular protocols: Aave, Compound, MakerDAO
🔄 Decentralized Exchanges
Swap tokens directly from your wallet without a centralized exchange.
Popular protocols: Uniswap, SushiSwap, Curve, Hyperliquid
🥩 Staking
Lock up tokens to support network security and earn rewards.
Examples: ETH staking, Lido, Rocket Pool
🌾 Yield Farming
Provide liquidity to DEXs and earn trading fees plus token rewards.
Higher risk but potentially higher returns
Understanding DeFi Risks
⚠️ Key Risks to Know
- Smart Contract Risk: Bugs in code can lead to fund losses. Use audited protocols.
- Impermanent Loss: Providing liquidity can result in less value than simply holding.
- Liquidation Risk: Borrowed positions can be liquidated if collateral value drops.
- Rug Pulls: Unscrupulous developers can drain liquidity. Stick to reputable protocols.
- Gas Fees: Ethereum transaction costs can be high during network congestion.
Always research protocols before using them, and consider the tax implications of your DeFi activities. Learn more in our DeFi yield taxation guide.
Recommended Exchanges
Alternative Exchanges
- Revolut – Modern mobile-first app
Local Options
- Kraken – Trusted US-based exchange
Jaa opasJaa
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