The DeFi investing journey: A step-by-step guide
By Exponential Team
Published May 15, 2024
The world of DeFi offers exciting opportunities for earning yield on your investments. Entering the DeFi world, however, can seem daunting due to its complex processes. Fear not, for we'll guide you through the step-by-step journey of investing in a DeFi liquidity pool.

Step-by-step guide to investing in a DeFi liquidity pool

Step 1: Funding your account

Before diving into DeFi, you need some cryptocurrency. Ethereum (ETH) and USD Coin (USDC) are common starting points due to their wide acceptance in DeFi protocols.
  • Acquire cryptocurrency: You can buy ETH or USDC on a centralized exchange like Coinbase, Binance, or Kraken. Create an account, complete the necessary KYC processes, and use fiat money to purchase your starting crypto.

Step 2: Setting up a crypto wallet

Once you have your cryptocurrency, you’ll need a place to store it and interact with DeFi platforms.
  • Create a wallet: Download MetaMask, a popular Ethereum wallet, or another wallet provider and follow the setup instructions. Make sure to keep your seed phrase in a safe, offline location.
  • Transfer to MetaMask: Withdraw your ETH or USDC from the exchange to your new MetaMask wallet. Be sure to double-check the address and be aware of withdrawal fees.

Step 3: Researching protocols

The next step is to find the right DeFi protocol. This is crucial, as it involves risk assessment and understanding the potential returns.
  • Due diligence: Research various platforms, understand their risks, and read up on their smart contract audit reports. Resources like Defillama or CoinGecko can provide valuable insights. The protocol’s own documents or whitepaper are also important to understanding key risks.
  • Yield farming opportunities: Look for liquidity pools with favorable yield farming conditions. Keep an eye out for the Annual Percentage Yield (APY) and how often you can claim your rewards.

Step 4: Investing in a liquidity pool

With a funded wallet and a chosen protocol, you’re ready to invest.
  • Connect your wallet: Go to the DeFi protocol’s website and connect your MetaMask wallet.
  • Choose the right pool: Select the liquidity pool that aligns with your investment strategy.
  • Deposit: Follow the protocol’s process to deposit your ETH or USDC into the pool. Confirm the transaction in your wallet and monitor the gas fees.

The simpler alternative: Exponential DeFi

Navigating the DeFi space requires time, research, and a fair bit of technical know-how. If this process seems too intricate or time-consuming, Exponential offers a simplified solution.
  • One-click invest: With Exponential, you can bypass the complex steps and directly invest in top curated DeFi pools.
  • Curated pools: Exponential’s platform offers handpicked pools, vetted for their performance and risk, providing a hassle-free investment experience.
Investing in DeFi can be a rewarding journey, offering greater control over your financial investments and the potential for high yields. However, the ease and simplicity of our platform can't be overstated, especially for those looking to dive into DeFi without the technical depth.
Ready to start earning with DeFi?