DeFi is to crypto what Tesla is to the auto industry. It's new, it's trendy, it has a lot of fans, and if you're an investor, it's supposed to help you make a lot of money. However, it takes a lot of effort to truly understand the underlying technologies and realize the potential shortcomings. DeFi is probably one of the most challenging areas of the entire crypto industry.
How a DeFi wallet works
A DeFi wallet is an application that stores your crypto assets, but which only you can access. This type of wallet cannot be linked to any centralized exchange (CEX) and can be linked to a decentralized exchange (DEX). DeFi wallets are quite secure - only those who know the seed phrase or own the private key can access the funds.
Most DeFi wallets are located on the Ethereum blockchain, but there are other alternative blockchains such as Solana (SOL) and Cardano (ADA) are also becoming increasingly popular. When you transfer tokens between two DeFi wallets, the transfer occurs using special complex algorithms that allow the transfer to take place directly between the two wallets without the involvement of third parties. These complex algorithms are called smart contracts. The benefits of using such wallets can be lower transaction fees, faster transaction speeds, and greater flexibility.
Choosing a DeFi Wallet
Choosing a DeFi wallet and DeFi platform can be quite difficult, especially if you are new to cryptocurrency. It mostly depends on what you plan to use your wallet for. Some decentralized exchanges (DEX) may offer you the opportunity to engage in high-yield farming, while others may be more secure or provide more flexible or faster transactions. Yield farming is the process of lending out your tokens and receiving interest in return. This can be compared to owning bonds, but usually with much higher returns and much more flexibility. Now let's check the most popular DeFi wallets:
MetaMask
MetaMask is the most famous DeFi wallet with over 30 million active users. It can be used either through a web browser or through a special smartphone application. MetaMask's main focus is providing solutions related to transactions, trading and token exchanges. The wallet provides direct access to the Ethereum (ETH), Polygon (MATIC), BSC, Avalanche (AVAX), Fantom (FTM) and Celo (CELO) and uses various algorithms to ensure user anonymity.
Trezor
Trezor is considered one of the most secure DeFi wallets in 2022. There are 2 hardware wallets to choose from - Model One and Model T. These guys will store your assets in cold storage, which reduces the chances of hackers attacking them. Trezor wallets contain over a thousand coins. One of the most interesting features of this wallet is Trezor Suite, a desktop and browser application linked to your hardware wallet. With this app, you can buy, exchange and spend without having to partner with other exchanges.
ZenGo
ZenGo is a DeFi wallet app for smartphones, available for both Android and iOS users. It already has more than half a million users from literally all countries of the world. The platform can be used for farming and accessing various independent DeFi applications. The ZenGo wallet can also be integrated with Uniswap, giving users access to one of the largest cryptocurrency DEX platforms in existence. The developers' main focus seems to be on integrating with as many different DeFi applications as possible, so if you're always looking for new crypto technologies, this is the smart contract wallet for you.
Conclusion
DeFi wallets and DEX platforms can offer access to high-yield farming, low-fee cryptocurrency transactions and trading, but unlocking their full benefits usually requires a deeper understanding of the crypto industry. DeFi wallets can also be used to access various DeFi and NFT applications.
