What Are the Easiest DeFi Platforms for Crypto Beginners?

What is DeFi?

As mentioned above, DeFi refers to decentralized finance. Decentralized finance applies blockchain technology to existing traditional, centralized finance concepts such as borrowing or lending. In traditional finance (TradFi), power and control is concentrated within archaic institutions and corporations. DeFi, on the contrary, distributes financial power and control amongst participants.

Explaining the details behind how DeFi works is beyond the scope of this article, but, generally, the terms you will hear about are lending, borrowing, staking, liquidity providing/mining, and yield farming. These are most likely the tools you will use while experimenting with DeFi, and the returns you can generate are likely much higher and more accessible than other passive income strategies you have come across.

What is a DeFi Platform?

A DeFi platform is an application that has made DeFi tools available in user-friendly ways. These tools are the lending, borrowing, staking, liquidity providing, and yield farming mentioned above.

Not all blockchain protocols have the same DeFi opportunities. For example, you will be hard-pressed to find the same DeFi functionality on the Bitcoin blockchain as you would on the Ethereum blockchain. Ethereum opened the doors to DeFi, and still yields the most opportunities. Ethereum has its drawbacks, though, and DeFi platforms on other blockchains, such as Binance, have done well to improve the experience for newcomers.

There are two main types of DeFi platforms. The first is known as a DEX, a decentralized exchange, and is easier to get started with. DEXs facilitate the exchange or “swapping” of one crypto for another. In order to offer this they also have liquidity pools to facilitate swaps and often have yield farming along with staking. As you explore DEXs, you will see that some are more suited to particular groups of tokens depending on which blockchain they are built upon.

The second type has different functions than a DEX, and is more tailored toward lending and borrowing. They are often called lending platforms. Staking, liquidity providing, and yield farming are sometimes available as well, it just depends on the platform. Lending platforms are used for depositing assets in order to use them as collateral for loans rather than swapping.

There are centralized exchanges, CEXs, in DeFi as well. Some, such as Binance and Crypto.com, also offer DeFi tools. Without further ado, let’s get into our list of DeFi platforms for crypto beginners.

Four DeFi Platforms for Beginners

The following are four relatively simple platforms for getting your feet wet in DeFi.

It should be noted that even the simplest DeFi platforms require a base understanding of crypto and there are inherent risks with using DeFi (indeed many of the biggest hacks over the last few years have in DeFi). That said, if you are still interested in DeFi, these four products represent solid entry points:

PancakeSwap

PancakeSwap is a DEX built on the Binance blockchain. You’re not going to find borrowing and lending on PancakeSwap, but there are plenty of staking and liquidity providing (LP) opportunities to look out for. Binance has historically had very low transaction costs, making this a forgiving and fertile DeFi platform.

SushiSwap

SushiSwap is a unique DEX in that it is well integrated across blockchains, which makes it quite versatile. They have their own suite of offerings that include borrowing and lending along with staking and LP. The user experience on SushiSwap is similar to PancakeSwap, but with an extended suite of offerings to explore.

Anchor Protocol

Anchor Protocol is the first and more user-friendly of our non-DEX recommended DeFi platforms. Anchor prides themselves on having the highest and most stable APY, annual percentage yield, than any other protocol. You will see some sky high APYs out there, but they fluctuate a lot. Anchor’s APY hovers consistently at 20%, which is very high by TradFi’s standards. Anchor is built on Terra’s blockchain.

Yearn Finance

Yearn Finance was started by the “godfather” of DeFi, Andre Cronje. He is referred to as such, because he was essentially the first person to start offering DeFi as a service. You will notice some high APYs on Yearn’s platform, but the process is less user friendly. Ethereum began as the main blockchain protocol for Yearn, resulting in high gas (transaction) fees. Yearn has expanded to many other blockchains including Binance and Avalanche which both offer far cheaper transaction fees. Be diligent with your research before diving into this one.

A DeFi Strategy Recommendation

While  there are many money making opportunities out there, you don’t need to rely on platforms like those mentioned above for your passive income interests. Many projects are offering DeFi functionality within themselves. Check out the tokens you are interested in or are already holding. If they offer staking, liquidity providing, or more, then you have the opportunity to gain interest on tokens that you already believe in, and often with less risk than external platforms.

You can hold these for the long-term, and also take profit from your interest along the way.

Regardless you should always start small and never risk money that you can’t afford to lose.

DeFi Opens a World of Possibility

We have gone over the fundamental idea of DeFi and DeFi platforms, the most user-friendly DeFi platforms out there, and a few extra ideas to keep in mind.

You also have an idea now of the terms you’re likely to come across as you dive into DeFi. Good luck on your yield-generating endeavors.