On our way to passive income, we already explored some easy ways that can give us a small interest for our assets, in a way that lets us feel quite safe because we trust the institution that is taking care of them. It is more similar to putting money in a bank - the crypto way.
You can set up your investment and forget about it or watch it slowly but steadily grow.
Would you like something more? Maybe a higher APY? Want to see your assets grow faster or earn newly launched tokens? That’s when DeFi comes to your help!
If you never heard about DeFi and would like to find out more, I would like to suggest this very good article I read a few days ago.
IMPORTANT
As always in the finance world, the more an investment seems too good to be true, the riskier it is! What I’m about to talk about will involve mainly quite new tokens, subject to high volatility, often developed by an anonymous team. Please, do not invest any money that you cannot afford to lose and evaluate carefully each project before investing in it!
My suggestion? Store your main assets using a safer option (as Celsius for example) and forget about them. Keep a small portion out and play with them with DeFi projects that you like! It will be fun and it will be quite satisfactory if you will be able to get some high gains! Just be careful to not overdo it and don’t invest your whole portfolio in it. As always, diversification is key.
So? How do you participate in DeFi?
Since I like to invest small amounts in various projects, I completely gave up on trying anything on the Ethereum blockchain. Gas fees are too high at the moment and I want to feel free to move my assets around without spending too much. This is why I will explain how you can participate in DeFi on the Binance Smart Chain (BSC from now on).
Get your coins ready
As you need ETH to pay for transactions on the Ethereum network, you will need BNB to pay for transactions on the BSC.
The easiest way to get them is to buy them on Binance. Anyway, some other exchanges now offer them, as Kucoin. Here’s a comprehensive list of available markets.
Wallet setup
Got your BNB? Good. To interact with the websites of the various DeFi projects you need to take them out of the exchange and move them on an external wallet. Here’s a list of wallets that already support BSC.
Personally, I use TrustWallet, but be aware it is only available on mobile platforms. If you want something that you can use on desktop, an option like Metamask is probably better.
Note: if you’re using TrustWallet on iOS and the Browser tab is not showing, please follow these instructions.
Note: if you’re using Metamask.
As it natively only support the Ethereum network (unless this changed recently) will need to manually add the BSC network to it. To do it follow these instructions.
So, for the purpose of this guide, I will assume that we’re buying BNB on Binance and using TrustWallet.
Important information for the correct coin transfer
Please note that on Binance you will need to buy at least 0.1 BNB (+BSC transaction fee of 0,0005 BNB) to move it outside of the platform.
Anyway, go to your spot wallet and withdraw your BNBs to your TrustWallet BSC address.
Important! In your TrustWallet you will find 2 different BNB. The one you want to refill is the one with the black background, that says "Smart Chain" as its name.
Very Important!!! To withdraw correctly, select BEP20 (BSC) in the Network menu on Binance.
Have your cake and eat the ones you'll gain
Once your wallet's ready, you can go to the "Browser" tab and choose the application you want to access. If it's not on the list, you can just carefully type the address in the bar on top.
The first obvious choice that comes to mind when talking about DeFi on BSC is PancakeSwap! Yes, you read it right.
And that’s not only supercute and adorable, it also offers impressive APYs if you stake CAKE tokens! You can buy them on Binance and transfer them to your wallet like you did with BNB, or you can buy them directly on PancakeSwap converting some of the BNB you already transferred. A small transaction fee will apply, usually around 0.50 euros. So always remember to save some BNB on your wallet to pay for the transaction fees. I suggest you try to keep at least 0.01 BNB always available on your wallet in case they're needed.
Also please note that for some operations you will have to pay 2 different fees: a very small one to approve access to your asset and the real one to perform the actual action (swap, stake, etc). Luckily, transactions on BSC are still very cheap, but it’s useful to remember to always keep some BNB at hand.
Choose your pool
If you have BNB and CAKE on your wallet, the first section of PancakeSwap that I would like you to focus on is the Pools one.
Here you will see a veeery long list of tokens you may earn. All you need to do is choose one or more pools that interest you, click on the "Approve CAKE" button and pay the first (very small) transaction, then choose the amount you would like to invest, click the "Stake CAKE" button and pay the last transaction.
That's it, you're done!
You will see your chosen asset slowly grow.
The only downside in this is that you will have to pay an additional transaction fee if you want to Harvest your rewards periodically. This can be avoided if you wait until you want to unstake, and do everything in just one operation. Rewards will be deposited into your wallet.
If you chose the CAKE pool, you may want to periodically harvest and add your interest to your stake, so you're compounding your interest. This is only worthy if the interest you gained is higher than the transaction fees you will pay to do this operation.
Luckily for you, there are a number of platforms that can optimize this operation... but this is a story for another time! ;)
Conclusion
There are so many projects now on BSC and you will probably discover a new one each day. Anyway, I encourage you to move cautiously in this world as unfortunately some of them proved themselves to be a scam and stole deposited funds (rug pull). Please always research cautiously a project before investing and don’t concentrate all your funds on a single one!
That said, have fun!!!