Invest in DeFi – Investing in DeFi Beginner’s Guide 2021

Fact Checked by Gary McFarlane

There’s a lot of buzz happening around DeFi, which simply stands for decentralized finance. Decentralized finance is one that is not controlled by a single government or bank. Decentralized currency examples include Bitcoin, Ethereum, Litecoin, and other cryptocurrencies that are created on blockchain technology. This innovative technology particularly became popular in the USA in recent years and in this tutorial, we will explore DeFi with the due diligence it deserves.

Just like central financial services with a central authority, DeFi tokens too must be bought or sold on exchange platforms. If you plan to dabble in cryptocurrencies a lot, this article shines a light on some of the best DeFi trading platforms in 2021. We’ve created a well-researched list of premium crypto platforms with DeFi focus and answered some of the most common DeFi related questions.

#1 Broker to Invest in DeFi  – eToro

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How to Invest in DeFi – Step by Step Guide 2021

If you are interested in investing in DeFi, here’s a step by step guide to purchasing DeFi tokens:

  • Step 1: Create an eToro Account – The first thing to do is to create a trading account on a trustworthy platform like eToro. Just go to the eToro website and sign up for free.
  • Step 2: Verify Yourself – After that, you can verify your account. Provide a photo ID and proof of address. These will include your passport/driving license and a bank statement or utility bill.
  • Step 3: Deposit Funds into Your Account – The next step is to deposit money into your account once it has been verified. You can do this by clicking on “Deposit Funds” and entering the amount of money that you are planning to invest. To finalize everything, click on “Deposit”
  • Step 4: Invest in DeFi – Simply go to the search bar and type in names of DeFi related tokens. For example “Avalanche” or “Luna”. You can also use tickers such as “AVAX” or “TERRA”. Click “trade” and input the amount you want to invest in. Click on “Buy” to confirm it.

Where to Invest in DeFi – Choose a Broker

Picking the right platform will make it easy for you to purchase and sell DeFi tokens effortlessly. Here are our top recommendations for the best online brokers on the market.

1. eToro – Best Broker to Invest in DeFi Overall

eToro is a pretty big name in the brokerage market. Since its establishment in 2006, the service has grown in popularity across the globe. They also managed to transform their brokerage platform to offer cryptocurrency solutions quite successfully. With over 20 million users and numerous awards, Etoro’s trust score is a big one. Let’s take a look at the rundown of its core features.

Security and Privacy

eToro is a low-risk trading platform. With numerous awards under its belt, it’s safe to assume they do a great job at keeping customer data safe. There are over 10,000 positive reviews on TrustPilot for the platform.

On top of glowing online feedback, eToro is regulated not by one or two but over three well-known agencies, some of which are the FCA and Australian Securities & Exchange.

Fees and Features

eToro has been providing narrow spreads for investing with CFDs for a long time. Additionally, depositing money is free and only $5 is required to withdraw assets. But because of social trading (possibly the most-beloved feature), most people don’t mind the small fees with this broker.

However, when it comes to crypto buying or selling, eToro is a trustworthy broker and their fees seem quite reasonable.

eToro Fees

Fee Type Fee Amount
Commission Fee 0%
Deposit Fee $0
Withdrawal Fee $5
Inactivity Fee $10 (Monthly)

 

Pros

  • Plenty of DeFi tokens to sell or buy
  • Convenient social trading strategy
  • Seamless account opening
  • Demo account
  • Transparent pricing
  • A low entry deposit fee

Cons

  • There is a withdrawal fee of $5
  • Some new tokens might be missing

67% of retail investor accounts lose money when trading CFDs with this provider.

2. Robinhood – Reputable Platform to Invest in DeFi

Like eToro, Robinhood is also a go-to trading platform for beginners trying to avoid complex environments. Their app is beginner-friendly and account opening is a breeze. Users receive daily news alerts and podcasts to help them set up successful trades.

This platform’s grand selling feature is the zero stock commission. This tactic serves to attract young investors and those without deep pockets. However, the service lacks the best trading and stock research tools. So it’s safe to assume seasoned traders may not find this platform ideal. Having said that they have been adopting the crypto assets successfully and there are plenty of cryptocurrencies to choose from on the platform.

Security and Privacy

While no platform can actually be 100% risk-free, Robinhood performs fairly well. For robust security, the apps will require fingerprint or face recognition. If you enable 2FA (two-face authentication, you will receive a login code through email or text.

Be informed; Robinhood has encountered 4 data breaches in the past, which is not surprising considering even the big players like Binance have been hacked. This means, personal protection measures like 2FA and keeping passwords offline should always be observed.

Fees and Features

Robinhood is still a new disruptive fintech player that is helping young individuals to explore the financial markets. This is mostly due to its commission-free nature. Curious how they make profits? They do it through selling ads and your order flow.

Robinhood Fees

Fee Type Fee Amount
Commission Fee 0%
Deposit Fee $0
Withdrawal Fee $0
Inactivity Fee $0

 

Pros

  • Hassle-free account setup
  • Straightforward to use
  • You can buy partial shares of any available stocks
  • Mostly a zero-fee platform

Cons

  • You have to pay for premium educational resources
  • No tax-advantaged or retirement accounts
  • Absence of bonds, mutual funds, and other tradable assets

67% of retail investor accounts lose money when trading CFDs with this provider.

3. Binance – Great Platform to Invest in DeFi

Are you a pro trader in need of top-notch platforms that offer a lot of features and a big token selection? Then you have to try out Binance. Binance is among the leading DeFi trading services with millions of users worldwide.

The service enjoys massive daily trades that amount to $76 billion daily in cryptocurrency transactions. So why is its wild success? Well, it’s actually easy to guess; the existence of smart contracts, faster speeds, fairly robust security, a very wide token selection and incredibly low fees.

Security and Privacy

Binance does a stellar job at keeping hackers and online scoundrels at bay. Ever since the 2019 hack, the service took extra measures to protect users’ information and investments.

The platform’s security features include restricted device access, investment insurance and address whitelisting. Of course, there’s two-factor authentication that serves as an additional layer of protection. Simply put, Binance is most likely more secure now than it has ever been before.

Fees and Features

Binance is recognized as one of the most inexpensive DeFi trading platforms. Its fees and commissions seem to outpace other big players. Here is a brief breakdown of its charges.

TradeZero Fees

Fee Type Fee Amount
Commission Fee 0.10%-5%
Deposit Fee $0
Withdrawal Fee $1-$15 highly depends on the crypto-asset
Inactivity Fee $0

 

Pros

  • 500+ crypto coins to trade
  • An inexpensive trading platform
  • Top-speed trade execution
  • Multiple crypto trading pairs
  • Reliable security

Cons

  • They don’t have a digital wallet
  • Attracts regulation woes in many countries
  • Unavailable in some US states

67% of retail investor accounts lose money when trading CFDs with this provider.

4. Crypto.org – Best Trading Platform for Innovative Environment

Crypto.org is a cryptocurrency platform and has a public blockchain that aims to accelerate the future of decentralized finance. It is said to be one of the biggest portals for crypto participants. On it, you can buy, sell or purchase many tokens related to decentralized money.

Like Binance, this service lets you trade over 150 cryptocurrencies both on-site and on their app. On the plus side, you can stake crypto coins and earn interests of up to 6.5%, ask for instant credit and earn rewards from various transactions. As you can see, Crypto.org lets you do more than just trading DeFi.

Security and Privacy

Crypto.org has a state-of-the-art blockchain network designed to be safe and secure. As is the nature of other blockchain technologies, there is no going back once a transaction has been initiated. But the platform itself offers a secure environment hosted on Crypto.com which will make investors feel safe. They have all the necessary layers of security from multi-factor authentication to SSL, biometric login technology to add password protection.

Fees and Features

Crypto.org is also one of the inexpensive trading platforms worth considering. Let’s take a look at the breakdown of their fees:

Webull Fees

Fee Type Fee Amount
Commission Fee 0.04%-0.10%
Deposit Fee $0
Withdrawal Fee Varies with each cryptocurrency
Inactivity Fee $10 per month (after 12 months if inactivity)

 

Pros

  • High-speed transactions
  • Low fees
  • Impressive security
  • Plenty of cryptocurrencies to choose from
  • You can request loans
  • Some transactions earn rewards

Cons

  • Has many products and services making it challenging for beginners
  • Weak customer service
  • Lacks a learning centre

67% of retail investor accounts lose money when trading CFDs with this provider.

5. AvaTrade – Accessible Way to Invest in DeFi

Another legitimate Dei trading that appeals to newbies is AvaTrade. There are two good reasons for that. First, the service has a low account minimum requirement, and second, you can copy trade experts.
Besides DeFi assets, the platform also lists other investments including indices, stocks, and commodities. Both new and expert traders will have access to the service in-depth educational resources, and a broad variety of trading tools.

AvaTrade is regulated by multiple recognized authorities and thus trustworthy. In fact, it protects the wealth of its investors by offering negative balance protection as well as insurance.

Security and Privacy

There are multiple ways AvaTrade promises to protect your funds. The first one is by offering negative balance protection. Secondly, they say that in event of insolvency, eligible clients get recompense from the Investor Compensation Scheme (ICS) which covers up to €20,000 in eligible countries.

AvaTrade also uses On-time passwords and AvaProtect to keep users’ accounts safe. Unfortunately, both the website and apps do not have biometric or two-factor authentication protection.

Fees and Features

AvaTrade is one of the best DeFi trading platforms with competitive spreads. Their other fees are not steep as you can see below.

Interactive Brokers’ Fees

Fee Type Fee Amount
Commission Fee 0%
Deposit Fee 0%
Withdrawal Fee $0
Inactivity Fee $30 for 3 months and $100 for a year of inactivity

 

Pros

  • Adequate and well organized educational resources
  • Beginner-friendly low account minimums
  • Over 1200 trading instruments
  • You can copy other traders through numerous third-party apps

Cons

  • Not FCA-regulated which could be concerning for some investors
  • Not available in the US
  • Absence of stop-loss orders

71% of retail investor accounts lose money when trading CFDs with this provider.

Invest in DeFi – Broker Price Comparison

Picking a cryptocurrency platform can be quite challenging when they are so many options, features and fee structures. To help you get a better idea we created a cryptocurrency brokerage price comparison table:

 

Broker Commission Deposit Fee Withdrawal Fee Inactivity Fee
eToro 0% $0 $5 $10 monthly (after 12 months inactivity)
Robinhood 0% $0 $0 $0
Binance 0.1% – 5% $0 $1-$15 (depends on crypto) $0
Crypto.org 0.04%-0.10% $0 (depends on crypto) $10 monthly (after 12 months inactivity)
AvaTrade 0% 0% $0 $30 for the first 3 months $100 yearly after that

 

What are the Different Ways to Invest in DeFi?

If you are a new investor deciding on which method to invest in decentralized finance (DeFi), it can be a challenging task. This is mostly because you need to have a good understanding of the different types of investment options. On top of that, you also need to learn how to invest in them.

But, don’t be disheartened by the learning curve. As a beginner starting with baby steps and small amounts is key. Investing will eventually be easier for you. As to the different methods to invest in DeFi, we have broken down 2 of the main methods you can try today:

DeFi Tokens

The primary method of investing in DeFi is probably purchasing their tokens directly. Some of the DeFi tokens with a large market capitalization are Curve DAO (CRV), Aave (AAVE), Terra (LUNA) and Compound (COMP).

Moreover, DeFi is a booming subsector in crypto nowadays with many innovative projects coming out every week. By increased activity, a byproduct is unfortunately scam projects. So you should always make sure to research these projects on social media, search engines and crypto exchanges. Since the requirements to get listed on a centralized exchange can be very strict, it’s much less likely to have an outright scam project listed on a trustworthy platform.

The main purpose of these tokens is usually to interact with the DeFi platform and harvest decentralized yield. However, due to various risks involved especially beginner investors in crypto may choose to invest in the technology behind the projects rather than individual tokens.

Blockchain Currencies

DeFi projects need to exist on reliable and proven blockchain technology. Some blockchains are particularly optimal for DeFi activity to thrive since their transaction finality is fast, smart contract environment is innovative and transaction fees are low. In 2021 Avalanche ($AVAX), Fantom ($FTM) and Solana ($SOL) have been popular blockchains on which many DeFi projects thrived. By buying cryptocurrencies directly rather than specific DeFi projects you can minimize your project-specific risks. They are also likely to have a lot fewer exploits since the development of a blockchain is a much more rigorous process in most cases.

Decentralized Exchanges (DEX)

Although decentralized exchanges usually aren’t DeFi tokens themselves, if there are many successful DeFi projects mainly listed on a specific decentralized exchange (think UniSwap or Pangolin Exchange), then these dApps will benefit from the increased trading volume and popularity and usually have a healthy price uptrend according to the activity. So DEXs can be a creative way to get partial DeFi exposure on a specific chain.

Best Ways to Invest in DeFi

As mentioned above, there are two main ways of investing in DeFi which are by buying stocks or an ETF. The best way to invest in it if you are a beginner is by investing through an ETF. This is because you don’t have to do the legwork since a brokerage will take care of everything for you. The downside is that the fees are considerably higher compared to investing through stocks.

Is DeFi a Good Investment?

DeFi is becoming a massive ecosystem with many good projects as well as bad ones. Today due to hype and fast adoption many DeFi tokens are skyrocketing along with Bitcoin and main cryptocurrencies. In fact, due to their risky nature and high-innovation levels, some DeFi tokens can be observed to create 100x even 1000x returns which is mind-blowing. On the other hand, if there is an exploit in the platform, bad actors can drain all the value in the system so it’s really important that the team behind a project knows what they are doing.

Investing in DeFi – What are the Risks

Unfortunately, the DeFi world comes with high risks. It has happened multiple times that a black hat hacker discovered a glitch or an exploit in many lines of codes that power a Defi project just to withdraw investors’ funds and vanish. There have also been cases where projects and teams/individuals behind them had bad intentions. Incompetency can be another risk factor to lose funds in DeFi.

Most of the risks emphasize the importance of security and trust factors involved in a DeFi project.

Exploits

Consequently, DeFi Entertainment had to shut down a good number of its theatres and screens. Although the company is making efforts to restructure itself, it is struggling because of poor business. It is losing money every quarter and its IBD rating is down to 70. Truth be told, it is difficult to tell whether the company will make any profits in the end.

Regulatory Space

Today, most regulation is very ambiguous when it comes to crypto and blockchain and DeFi is no exception. Crypto markets fluctuate with the regulation related news and announcements by authorities and influencers some of which can even be considered reckless.

As blockchain evolves and people in this space continue to innovate, it seems unlikely that there will be precise regulatory conclusions and consolidations anytime soon which makes the crypto-assets even more volatile and this includes DeFi.

High Volatility

Besides regulatory ambiguity, there are many other reasons that make DeFi space extra volatile. Cryptocurrencies are known to be volatile in general. The technology is new and there is usually some kind of price exploration going on. On top of this, DeFi projects involve lots of funds moving around and this makes DeFi even more volatile in the crypto ecosystem.

Additionally, highly competitive projects and new features coming out make a tremendous amount of crypto assets move from one platform to another within hours or days. Moreover, DeFi follows the fluctuations of Bitcoin as well as the cryptocurrency of their native blockchain adding more volatility to the equation.

How to Invest in DeFi with eToro?

eToro is a user-friendly platform so navigating to buy DeFi tokens is easy on the platform. Here are the simple steps that you can follow to start investing in DeFi tokens:

Step 1: Create an Account

You need to sign up for an account with eToro before you can invest in DeFi. To do this, simply go to the eToro website and click on “Create Account”. You will be redirected to a page that would require you to answer details about your name, birthdate, etc. Make sure to answer all of these and click on “Join Now”.

Step 2: Verify Your Account

After that, you will need to provide identity for verification. This is required because it is a regulated platform with strict money laundering and data protection rules. To verify your account, provide a valid ID (such as National ID, Driver’s licence, Passport) with a photo and proof of address (recent utility bill etc.).

Step 3: Fund Your Account

To deposit funds to your brokerage account, you just need to click on the “Deposit Funds” option and input how much you want to invest. Click on “Deposit” to finalize the funding. You can use various payment methods for this, including bank transfer, e-wallets such as Skrill or Paypal, and credit cards.

Step 4: Invest in DeFi

That’s all. You can start investing in DeFi. You can do this by searching for it in the search bar. Just type in the crypto asset you are interested in such as “Avalanche” or “Aave”. Alternatively, use token tickers such as “AVAX” or “AAVE”. Press “Trade” and a pop up will appear. Fill in the amount you want to invest then click on “Buy”.

Conclusion

You just read about the best DeFi trading platforms of 2021. If you are a beginner with little to no experience, eToro’s social trading feature could help mimic the trading strategies of experts. Robinhood’s zero-fee is attractive to those with a few investments as well.

For experienced traders and holders (hodlers as commonly used in crypto communities), Binance and Crypro.org can be sound choices. Like they always say in the crypto circles, invest only the amount you can afford to lose. Happy decision-making and trading!

#1 Broker to Invest in DeFi  – eToro

1
$50Exclusive promotion
Our score10
  • Buy over 800 stocks with 0% commission
  • Social trading network
  • Copy over 12 million traders and investors
0% Commissionstart TradingOur score 10

FAQs

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About Umut Sagir PRO INVESTOR

Finance and Tech professional. Founder of HolyPython.com. In recent years, Umut helped reputable clients such as MasterCard New York HQ, Deutsche Bank, FluidAI, Danske Commodities, EvoShave and others with cutting-edge technology implementations and financial research.