Getting Started in DeFi - Part 7 - DeFi Best Practices
Welcome to the 7th in this 8-part Getting started in DeFi series. In the last lesson we covered Advanced DeFi concepts. In this lesson, we'll take a look at some DeFi best practices.
The full series is as follows:
Introduction to DeFi: This lesson covers what DeFi is, why it's important, and how it's different from traditional finance.
Understanding DeFi risks: This covers the risks associated with DeFi, such as smart contract security, liquidity, and volatility.
Choosing a DeFi platform: This covers the different DeFi platforms available, and how to compare and choose the right one for your needs.
Wallets, Buying and More: This lesson covers the basic steps for getting started with DeFi, including setting up a wallet, buying cryptocurrency, and interacting with DeFi protocols.
DeFi projects and protocols: This lesson introduces some of the most popular DeFi projects and protocols, such as MakerDAO, Compound, and Uniswap, and explains how they work.
Advanced DeFi concepts: This lesson covers more advanced DeFi concepts, such as yield farming, liquidity mining, and composability.
DeFi best practices: This lesson covers best practices for using DeFi, including how to manage risk, protect your assets, and stay up to date with the latest developments in the DeFi space.
Conclusion: This lesson summarises the key takeaways from the course and provides resources for further learning and exploration.
DeFi Best Practices
While DeFi has many benefits, it also comes with unique risks and challenges. This article will provide some best practices for using DeFi, including how to manage risk, protect your assets, and stay up to date with the latest developments in the DeFi space.
Here are some best practices for using decentralized finance (DeFi) platforms:
Understand the risks: DeFi is a relatively new and rapidly evolving sector, and it carries a higher level of risk compared to traditional finance. It is important to understand the risks involved and to be prepared for the potential loss of your capital.
Diversify your portfolio: Don't put all your eggs in one basket. It is a good idea to diversify your portfolio across different DeFi platforms and protocols to reduce your risk.
Consider non-custodial wallets: Non-custodial wallets allow you to retain control of your assets and reduce the risk of losing them due to the failure or hack of a third party.
Use collateral: Many DeFi platforms require you to provide collateral when borrowing cryptocurrency. Make sure you understand the requirements and have enough collateral to cover your position.
DYOR - Do your own research: Don't blindly follow the advice of others. Take the time to do your own research and understand the risks and rewards of each DeFi platform or protocol before using it.
Keep your software and devices up to date: Make sure you are using the latest version of your wallet software and that your devices are secure and up to date with the latest security patches.
Follow security best practices: Use strong passwords, enable two-factor authentication, and use a hardware wallet for added security. Be mindful of centralised platforms too as they can also get hacked.
Use reputable platforms: Do your due diligence and only use reputable DeFi platforms that have a proven track record of security and stability.
In addition to managing risk and protecting your assets, it's also important to stay up to date with the latest developments in the DeFi space. The DeFi ecosystem is constantly evolving, with new protocols, projects, and innovations emerging all the time. By staying informed and staying engaged with the community, you can stay ahead of the curve and take advantage of the latest developments in DeFi.
Overall, using DeFi requires careful consideration and attention to detail. By following best practices and staying informed, you can make the most of DeFi and take advantage of the many benefits it has to offer.