Once the domain of cryptocurrency experts and whales, decentralized finance (DeFi) has become far more accessible in recent months, due to an influx of user-friendly platforms and a growing library of resources surrounding DeFi.
But while DeFi is becoming increasingly accessible to the everyday cryptocurrency user, actually making the most of it isn’t quite so straightforward. With that in mind, we take a look at some of the most commonly overlooked ways to make the most of what DeFi has to offer.
Avoid High Transaction Fees
Transaction fees have quickly grown to become a serious issue for many Ethereum DeFi users, since these have recently ballooned to extortionate and potentially unsustainable levels.
Today, with Ethereum fees now averaging at more than $10 a pop, it’s not uncommon to spend up to 10% of a transaction’s value on its transaction fee alone — eating a serious chunk of the profits for smaller DeFi investors.
Fortunately, there is now a range of solutions in place which can be used to avoid the high fees that usually come with DeFi transactions.
Celer’s Layer2.finance is one such solution quickly gaining momentum among DeFi users, due to its potential to cut transaction fees down to just a tiny fraction of what users are accustomed to.
The platform is a layer 2 scaling solution for the Ethereum DeFi ecosystem and allows users to access a wide variety of DeFi applications — such as Curve, Aave, and Compound — with minimal transaction fees. It achieves this by securely aggregating the deposits of multiple users into a single layer 1 transaction to minimize fees, while allowing users to easily and securely move their funds between platforms at a minimal cost.
With support for four different stablecoins (DAI, USDC, USDT, and BUSD), Layer2.finance helps users earn a yield on their idle balances without losing a large chunk of their returns due to fees — making it particularly well-suited to those transacting with smaller sums.
Hedge Your Risks
Although turning a profit in DeFi is largely centered around choosing the right investment opportunities, few also consider the need to protect the value of these investments while they earn a yield.
After all, while volatile cryptocurrencies may be earning an impressive APY in a yield farm, liquidity pool, open lending protocol, or some other DeFi protocol, they may be losing considerable market value — which can make these gains moot.
But while a large proportion of investors simply hope that their yields outweigh any possible losses incurred by the underlying asset, others take out protection to ensure they are protected on the downside.
One of the easiest ways to achieve this is by opening a short position using a decentralized options trading platform like Premia. Being decentralized, Premia allows users to create customized call and put options for a huge range of DeFi coins — including Uniswap (UNI), Curve (CRV), Chainlink (LINK), Yearn Finance (YFI), and more.
The platform also includes a state-of-the-art peer-to-peer marketplace, where users can source liquidity for custom options without relying on centralized exchanges and custodians. Here, users can trade a variety of options and hedge their assets, protecting themselves against volatility while they earn yield.
Maximize Your Yields
Making the most of your hard-earned money is one of the biggest challenges that come with investing — doubly so in the cryptocurrency industry, where yields can vary considerably from platform to platform.
However, extracting the most value from your idle assets is no simple task, due to the sheer number of different investment options and yield-bearing platforms in the DeFi space. As a result, it can become a time-consuming task to stay on top of things, while moving your money around to maximize your returns.
This is particularly problematic when you consider the challenges that come with moving funds across multiple chains, due to the cost of bridging assets from one chain to another and maintaining balances across multiple platforms.
Roseon, an aggregator for DeFi and CeFi platforms across multiple chains, helps to resolve this issue by providing an app that helps users optimize their yields. It achieves this by enabling users to access a wide variety of yield-bearing platforms from a single interface, while securely aggregating yields from multiple places to keep fees to a minimum.
The platform is particularly well-suited for beginner investors, due to its focus on legal compliance — with Roseon looking to become one of the first DeFi aggregators to operate under a license. This provides an additional layer of security to DeFi users, who may be wary of dealing with otherwise faceless DeFi apps.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.