Hey guys, here again with another blog on my crypto journey. I have been exploring crypto and its been fun, I have been discovering new ways to earn money and utilise it and its been really fantastic. I hear about DeFi a lot on this crypto space, but I haven’t used it before. But yesterday I got to use DeFi and I had a lot of questions to ask. I noticed that when I went to the site,( mind you, the blog I read recommended uni swap, the site with the unicorn logo) I saw a very friendly easy to understand interface. I didn’t find it hard to understand, all I did was read what is written on the screen and navigate my way around the site.
There is the swap function, where you can swap between tokens, pretty much easy, but I noticed something a little different, I have to know the chain I want to swap from. Didn’t know that, thought Ethereum is ethereum, why do I have to know if I should swap on the ethereum chain or the binance chain. What difference does it make? I had some binance coin in my wallet that I bought through a friend who is teaching me crypto. Wanted to see how DeFi works, so he suggested Binance coin because he said the gas fee is lower there. Showed me proof when he tried making a transaction on the ethereum chain and I saw a transaction fee that cost past $5. Then he explained that the reason it was that high is because that was ethereum congestion time. I got confused for a second until he made it relative. According to him, he said its like trying to get back home from work, or trying to go to work during rush hour, there are a lot of people that want to get to their destination, be it work or home, but the amount of vehicles available to get them there is limited. So the best way to filter the number of people trying to get into the vehicle is to increase the bus fare price. This way more people will retrace and not want to rush into the bus because its price increased, but people who don’t mind because they really want to get to their destination will pay the high bus fare and go. So its like that with gas fee and how high the ethereum gas fee gets sometimes. He said sometimes it gets as low as $0.4. Then I asked about the Binance chain, he said it gets as low as $0.03, with no further explanation I chose Binance.
I did my first transaction and it was so cool, but I was amazed on how it was smooth to convert some BNB to USDC. Who bought it from me? Is there like an instant buyer at the end? Turns out that this is the beauty of DeFi, its decentralised Finance, that doesn’t need a third party to help make transactions, its just between me and the blockchain. There is something called liquidity providing, people provide liquidity on this platforms to make it easy for me to easily swap my BNB to USDC.