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A crypto wallet allows you to store your crypto assets. There are different types of crypto wallets, varying in convenience in usage and how secure stored assets are.

In addition to storing your assets, a crypto wallet allows you to:<ul><li>Transfer crypto assets between crypto wallets;</li><li>Exchange your assets for other cryptocurrencies;</li><li>Login to blockchain services using your crypto wallet.</li></ul>

For sending and receiving crypto assets - follow me

How to send and receive crypto assets using your crypto wallet?

Each crypto wallet has a unique wallet address, sometimes known as a public address, which can be used to send and receive cryptocurrency. A wallet address is a string of letters and numbers and like an email address or bank account number, it is perfectly fine to share it with others.

What allows you to own and operate your crypto assets is a private key. It is essentially a secure code that enables you to make cryptocurrency transactions and prove ownership of your holdings.&nbsp;Each wallet gets a unique private key. There are a few things to remember about private keys:<ul><li>The private key is responsible for the security of your assets;</li><li>You can not share your private key with anyone because if you do so, you will lose control of your assets and they can get stolen;</li><li>No customer support team member will ask for your private key, and if they do, do not share it;</li><li>The same goes for any other user asking about your private key, no transaction requires you to share your private key.</li></ul>

There are three types of crypto wallets you should familiarize yourself with: custodial, non-custodial and hardware. You don’t have to choose just one, you can have multiple wallets, each for a different purpose.

Can you recall all of the facts about private keys?

Custodial wallets are all web-based applications that are often provided by centralized exchanges and simply require a creation of an account on the said platform.

With custodial wallets, the provider of your wallet, just like a bank, has the ultimate access to your funds. That is because custodial wallets store your private keys and use the said keys to confirm your ownership of the assets for you.While using a custodial wallet, users do not control the security of their wallet.

Another option is a non-custodial wallet, also known as a self-custodial wallet. Non-custodial wallets allow you to have full control of your assets.&nbsp;With a non-custodial wallet you are also responsible for keeping your private keys safe which is done with the help of a seed phrase.Here is what you need to know about seed phrases:&nbsp;<ul><li>A seed phrase is a randomly generated unique phrase which you usually encounter when setting up a new wallet.</li><li>You will need to write down your seed phrase in the correct order and keep it in a safe place.</li><li>&nbsp;Be prepared to reproduce it in case your wallet gets damaged.</li></ul>

Seed phrases are often compared to master passwords, anyone who has access to your seed phrase,&nbsp;has access to your crypto.Check your knowledge of wallet security here

The last option is a hardware wallet. Here is what you need to know about hardware wallets:<ul><li>They are exclusively non-custodial;</li><li>Their prices range from $30 to $150;</li><li>They are considered to be the most secure option for crypto storage;</li><li>The seed phrase for a hardware wallet is stored on the device itself.</li></ul>It is also recommended to store a copy of your seed phrase separately in case your wallet gets stolen, lost or damaged. This way you can still access your funds.To use the assets stored on your hardware wallet, you will need to connect it to a computer or a smartphone first and use an application for your wallet of choice.

There are a number of trustworthy providers of hardware wallets, right now Ledger and Trezor are leading the market with over 6 million units sold altogether

Drag characteristics provided in a list below to a matching type of a cryptocurrency wallet.

High time you created a cryptocurrency wallet.

To perform any kind of transaction with cryptocurrency you will need an address which you can get by creating a wallet.While custodial wallets are created automatically when you register on a crypto exchange such as Binance, non-custodial wallets have to be created by hand.&nbsp;Here are some of the biggest cryptocurrency wallets currently available on the market

Hurry up! The biggest cryptocurrency wallets are here!

Now let’s create your first crypto wallet by using the most popular wallet to date, Metamask, as an example.

Let’s create a Metamask wallet!

Lucy loves her crypto and she is a pro when it comes to different types of wallets. Lucy likes non-custodial wallets for their decentralization, custodial wallets for their convenience and she thinks hardware wallets are perfect for storing large amounts of cryptocurrency. Lucy wants to walk you through each wallet type and introduce you to her favorite one Metamask.

What is a crypto wallet?

Cryptocurrency is a digital asset managed by a decentralized entity. Fiat currency is the money you use in your everyday life, which could be dollars, euros, or any other currency issued by the government.

Now that you have created a wallet, you can purchase your first crypto, let’s figure out how.Buying cryptocurrency is the first step when it comes to a lot, if not all, crypto transactions:<ul><li>Crypto investments;</li><li>Paying for goods and services;</li><li>Paying for transaction fees;</li></ul>Note that each network requires a different token to complete a transaction, for example, Bitcoin requires a BTC balance so the user can pay for transaction fees.

Let’s see if you can recall some new terms!

There are a number of options when it comes to purchasing cryptocurrency.

1. Crypto exchangesThe process of buying cryptocurrency on a centralized exchange is simple and safe. Beginners often pick exchanges to purchase their first crypto due to their user-friendliness.&nbsp;However, you will have to complete a security check before completing any transaction, and the exchange’s services might not be available in your country.2. On-ramp solutionsSuch solutions allow you to use Apple Pay, Google Pay, or your card to buy crypto. Most popular wallets already have these built-in enabling users to buy crypto assets straight to their wallet.However, on-ramp solutions are not available in all countries and often operate with higher transaction fees depending on the country and your payment method.&nbsp;3. Peer-to-peer servicesPeer-to-peer services automatically connect buyers and sellers of cryptocurrency with a preferred location and payment method. These services accept dozens of payment methods and usually offer lower transaction fees.However, if you choose to use a peer-to-peer service manually like it is often done, you might face a number of unexpected issues, including the risk of being scammed.

Check if you can tell what sets each of these platforms apart

When buying cryptocurrency, you might have to go through an authorization process known as KYC, Know Your Customer. This process is done differently on each platform but it is essentially you proving your identity. This may include providing your ID and in some cases proof of address.Some platforms may also ask you to take a selfie when creating an account, and can ask you to do it again from time to time. All of this is done to prevent criminal activity and increase security.

Let’s check your knowledge of security checks when buying crypto

If you are looking to buy crypto the easiest way possible, doing it through an exchange might be it.

Please note that each platform has different limits when it comes to daily crypto purchases, monthly purchases, and purchases that can be performed without completing verification.

To buy cryptocurrency with a crypto exchange:<ol><li>Go to a cryptocurrency exchange;</li><li>Create an account and verify your identity if necessary;</li><li>Choose an asset;</li><li>Provide your bank details and complete the transaction;</li><li>Your assets will be displayed in your account on the exchange used to complete the purchase;</li><li>You can then store your assets in the said account or transfer them to a different wallet for further transactions.</li></ol>Here are some of the biggest crypto exchanges:

How to buy crypto on a peer-to-peer platform

If you are looking for an alternative method to buy cryptocurrency, using a peer-to-peer platform may be the way to go. These platforms allow you to buy assets from users just like you, either online or by meeting in real life.

A lot of peer-to-peer platforms offer to automatically connect you with a seller of a cryptocurrency you are looking to buy. In this case, the platform acts as arbiter, ensuring the security of your purchase.&nbsp;To buy cryptocurrency manually on a peer-to-peer platform:<ol><li>Go to a peer-to-peer platform;</li><li>Create an account and verify your identity;</li><li>Choose a crypto asset you want to buy and a fiat currency you want to trade in exchange;</li><li>Choose a listing that fits your payment method and you will be transferred to an order page;</li><li>Make your payment via a chosen method in a timeframe presented on the order page and confirm;</li><li>Wait for the seller to confirm they have received the payment for their assets.</li><li>Receive your crypto to your account on the peer-to-peer platform.</li></ol>

Please note that when buying crypto on a peer-to-peer platform, each user will have an individual limit for how much crypto you can buy from them. There will also be a rating that shows other users’ experiences with the seller.

Here are some of the biggest peer-to-peer trading platforms:

How to buy crypto with an on-ramp solution:

If you are looking to buy cryptocurrency quickly and only using a debit/credit card, the on-ramp solution may be the right choice for you.We are sure you have already created a wallet, but if you haven’t, check out our article <a href="https://edu.blocked.cc/trails/1/chapters/1" rel="noopener noreferrer" target="_blank" style="background-color: transparent; color: rgb(17, 85, 204);">“How to create a cryptocurrency wallet”</a>. In the article we walk you through the process of creating your own Metamask wallet with which you can also purchase cryptocurrency.Now we would like to show you how to buy cryptocurrency with a Metamask extension by simply using your card.

Let's buy with MetaMask

Welcome to Cryptoly, a city that never sleeps and never fails to complete a transaction. Every citizen of Cryptoly, including Max who wants to add some new assets to his portfolio, knows where to go to buy crypto. Max will walk you through his routine and show you how to buy cryptocurrency by using just your card and a Metamask wallet.

How to buy crypto?

You may have already come across the idea of a centralized exchange in our previous chapters <a href="https://edu.blocked.cc/trails/1/chapters/1" rel="noopener noreferrer" target="_blank" style="background-color: transparent; color: rgb(0, 0, 255);">Crypto wallet</a> or <a href="https://edu.blocked.cc/trails/1/chapters/2" rel="noopener noreferrer" target="_blank" style="background-color: transparent; color: rgb(0, 0, 255);">How and where to buy cryptocurrency</a>.A centralized exchange, or a CEX, is an online platform where you can buy, sell and exchange cryptocurrency. The main characteristic of a CEX is that it is managed by a centralized entity that acts as a custodian of assets you use for trading.

This means that when you use a centralized exchange, the exchange is responsible for the safety of the assets you store with it. A centralized exchange also acts as an intermediary between a buyer and a seller during an exchange.

Whilst you can exchange crypto assets with a centralized exchange, you can also access other available features which may include:<ol><li>Storing cryptocurrency. Centralized exchanges come in handy for storing cryptocurrency as they offer a wide range of digital assets from various networks which you can buy or sell at any convenient moment and simply store them in your CEX account. Usually a CEX account doubles as a crypto wallet.&nbsp;</li><li>Buying cryptocurrency. A lot of users rely on centralized exchanges to buy cryptocurrency as CEXs are usually the platforms to offer the ability to buy crypto with fiat currencies. This can be done by either buying assets from the platform itself or from other users which is possible on some centralized exchanges.</li><li>Trading. Centralized exchanges are often used as platforms for different types of trading such as spot trading, margin trading and others. Different trading strategies are used to make a profit either from an asset you already have or assets you borrow from an exchange platform.</li><li>Crypto loans. Some centralized exchange platforms allow users to not only take out cryptocurrency loans but also lend their own assets to earn interest. You can use your own crypto assets as collateral when taking out a loan which gets liquidated if your repayment is overdue.</li></ol>

Can you recall some of the new terms?

Centralized exchanges have played a big role in the adoption of cryptocurrency, especially as they are often seen as user-friendly and more approachable from a beginner’s perspective. CEXs also offer higher transaction speeds and features other types of exchanges might not.&nbsp;

Centralized exchanges storing your private keys for you and being responsible for the security of the assets you buy or exchange and store with them is another plus. Keep in mind that most centralized exchanges store their customer’s funds in offline storages to ensure their safety.&nbsp;On the other hand, centralized exchanges do tend to have higher transaction fees, which usually include a service fee, especially if you are trading more significant amounts of cryptocurrency.

Before you can start trading on a centralized exchange there are some things you have to do first:<ul><li>Create an account on a centralized exchange of your choice;</li><li>Complete a security check which may include providing your ID and proof of address;</li><li>Buy cryptocurrency to add to your account which often can be done on the exchange itself.</li></ul>

Let’s check your knowledge of centralized exchanges

How to exchange crypto on a centralised exchange

If you’ve already bought crypto and want to exchange it for a different asset, or simply want to learn now to do it - you’re in the right place.You do not need a wallet to exchange cryptocurrency with Binance, so don’t worry if you still haven’t got one. But if you are looking to create a wallet check out our article “<a href="https://edu.blocked.cc/trails/1/chapters/1" rel="noopener noreferrer" target="_blank" style="background-color: transparent; color: rgb(0, 0, 255);">How to create a cryptocurrency wallet</a>”.Now let’s see how to exchange cryptocurrency with Binance, the biggest centralized exchange.<ol><li>Go to the <a href="https://www.binance.com/en" rel="noopener noreferrer" target="_blank" style="background-color: transparent; color: rgb(17, 85, 204);">official Binance website</a>.</li><li>Click “Sign up with Email or Phone”.</li><li>Create an account and verify your identity by providing your personal details.</li><li>Deposit funds into your account by connecting either your card or bank account.</li><li>Purchase an asset you will exchange.</li><li>Click “Trade” on the homepage and then “Convert”.</li><li>Select a token you purchased earlier and a token you would like to receive in exchange.</li><li>Enter the amount of cryptocurrency you would like to exchange or would like to receive.</li><li>Preview your conversion and click “Covert” within 5 seconds or refresh the quote.</li><li>Congrats, you have exchanged cryptocurrency, it will appear in your Binance account.&nbsp;</li></ol>

The Centralized Center is the place to be in Cryptoly. Anyone who has assets to exchange eventually ends up here, including you, welcome! The Centralized Centre allows its visitors to not only exchange but also buy and store crypto, and much more. Step inside and find out more about the center’s features and how to exchange cryptocurrency with its most popular provider, Binance.

How to swap crypto on a centralized exchange?

Multi-purpose Web3 wallets are used to store various types of digital assets – from cryptocurrency to NFTs without any third-party intermediaries. They work in a similar way to standard crypto wallets but come with some extra functionalities that allow for interactions with decentralized apps on multiple blockchains through a single interface.Feel like you should come back to basics? Check our chapter on <a href="https://edu.blocked.cc/trails/1/chapters/1" rel="noopener noreferrer" target="_blank">address and wallet creation</a>.

What do you need a multi-purpose Web3 wallet for?

So apart from storing your funds, a multi-purpose Web3 wallet can be a great helper in:<ul><li>Managing and tracking digital assets spread across every wallet you own;</li><li>Accessing the vast ecosystem of decentralized apps;</li><li>Executing the most profitable and hassle-free trades on DEXs;</li><li>Trying out some bankless financial services like crypto loans;</li><li>Earning rewards by allocating your digital assets at appealing interest rates. Keep in mind that such investment strategies entail certain risks;</li></ul>

Check your knowledge about a multi-purpose Web3 wallet

Multi-purpose wallets were created to make Web3 easier for ordinary users. Not only do they help onboard new users but also save them time by removing extra steps so they can focus on broadening their horizons instead. Multi-purpose wallets provide a number of advantages.

Since multi-purpose Web3 wallets are non-custodial, you can make sure that your crypto belongs to you only. Without your private key or seed phrase, neither wallet developers nor hackers can access your funds.Some extra security measures, such as automatic app locking, backups and two-factor authentication can enhance overall security.&nbsp;

Another killer feature of multi-purpose Web3 wallets is the support of different blockchains that connect directly to each other. Thus, cross-chain trading becomes possible meaning that you can transact your crypto without any additional exchanges.

Multi-purpose Web3 wallets are designed in a way that allows you to set them up without any specific background crypto knowledge. The process itself takes just a few minutes, and once it’s completed, you can make your first deposits.

Another a plus is that you can import and export your private keys in-between wallets.

Due to their decentralized nature, multi-purpose Web3 wallets provide complete freedom when it comes to your portfolio. There’s no centralized institution monitoring your transactions, so you can send or receive digital assets without limits.

As more and more decentralized apps require non-fungible tokens to get started, multi-purpose Web3 wallets let you buy, sell, and store them. You can also track your NFT portfolio with the wallet’s interface.Some wallets even support NFT creation.

In decentralized finance, multi-purpose wallets serve as an identity card and a virtual bank account. Whether you are interested in trading digital assets, collecting NFTs, depositing crypto funds in exchange for rewards or connecting to decentralized apps, they provide you with access to all necessary tools and features in one place.

Drawbacks of using a multi-purpose Web3 wallet

However, despite the fact that multi-purpose wallets have many advantages, there are also other characteristics that you should take into account.

When operating a non-custodial wallet, you should be careful with your private key and seed phrase because if you lose them, no customer support team will be able to help you get your assets back. Besides, you should be very careful when transferring crypto to other wallets – if you accidentally send it to the wrong address, your funds cannot be retrieved.

Regardless of enhanced security, no Web3 wallet is ever fully protected against hackers. It is highly recommended that you also use hardware wallet and hold your funds offline to mitigate the risks of being attacked.Moreover, don’t forget that the official wallet representatives will never ask you for the information needed to access your assets. Never share your private key or seed phrase with anyone!

Check your knowledge of advantages of using multi-purpose Web3 wallets

Choosing the right multi-purpose wallet is important not only in the context of your funds’ security, but also to ensure that it has the ability to interact with dApps.In the table below there are 5 popular multi-purpose Web3 wallets now available on the market:

Check your knowledge of leading multi-purpose Web3 wallets

If you are looking to create a different type of crypto wallet, check out our MetaMask guide in <a href="https://edu.blocked.cc/trails/1/chapters/1" rel="noopener noreferrer" target="_blank">“What is a crypto wllet?"</a>

Ava is actively engaged in exploring the opportunities offered by the Web3 world. Apart from just buying and selling cryptocurrency, she often exchanges her assets on decentralized platforms and even earns passive income. In order to do it all seamlessly and quickly, Ava uses a multi-purpose Web3 wallet. And now she wants to introduce you to this instrument as well as to navigate you through its functionality.

What is a multi-purpose web3 wallet?

Blockchain Basics

In traditional finance, the exchange of currencies relies on large financial institutions which ensure the money flow is stable. These financial institutions are known as market makers and they participate in deals between buyers and sellers.&nbsp;In case of centralized exchanges, market makers are also those in charge of maintaining liquidity. In terms of cryptocurrencies, liquidity means that digital assets can be easily converted into cash or other assets without sharp changes in their value.But while CEXs provide an experience that may be more familiar to some users, they still take more time to approve transactions and complete exchanges. Money transfers can take up from a couple of hours to a couple of days!In DeFi, things are gradually becoming different due to the advent of decentralized exchanges, often shortened as DEXs.&nbsp;

Think of decentralized exchanges as marketplaces where users trade with each other directly from their crypto wallets. On DEXs, smart contracts take on the role of an intermediary who executes transactions, optimizing the process in favor of speed and providing a foundation for instantaneous exchanges.

Instead of market makers, average users can lock up their assets in a storage utilized by a platform which is similar to a bank vault. This storage is called a liquidity pool and it accumulates all deposited assets to enable trading on a DEX.

Additionally to exchanging cryptocurrencies, DEXs offer users to deposit their digital assets to liquidity pools. In return, users receive a certain amount of so-called LP tokens in accordance with the share they now have in the pool.&nbsp;These LP tokens can also be deposited to a DEX’s staking pool to generate passive income. Staking pool is another storage that keeps your digital assets locked for a certain period. Meanwhile, you're earning rewards on your staked amount.&nbsp;&nbsp;&nbsp;уCompleting exchanges that utilize the liquidity pool incurs trading fees. Simply put, after you stake your LP tokens, you start collecting these trading fees as a reward.&nbsp;

Let’s see if you’ve learned DEX basics

The use of decentralized exchanges brings numerous advantages, which significantly contributes to the steady proliferation of DeFi.

If you use a DEX, you’re at a low risk of being hacked, since these platforms are non-custodial in their design. This means that nobody except you can access your private keys and, accordingly, cryptocurrency. Meanwhile, DEXs themselves are used only as interfaces for executing exchanges.

DEXs are perfect solutions if you want your transactions to be private. They don’t ask you to sign up by sharing your sensitive data and complete time-consuming verification procedures known as Know-Your-Customer (KYC) and Anti-Money-Laundering (AML). This means that you are free from sharing your personal information such as your full name and a photo of your ID document.&nbsp;&nbsp;

Counterparty risk occurs when the other party participating in a transaction fails to meet the obligations set by a smart contract. With DEXs, counterparty risk is mitigated since there are no intermediaries involved and smart contracts execute exchanges only once the certain conditions have been met.Before getting started with the DEX of your choice, it’s highly recommended that you do research on whether its smart contracts have been audited by independent and reliable companies.&nbsp;

DEXs allow for adding cryptocurrencies that are designed on the same blockchain they are built upon. This provides users with the opportunity to access new crypto assets even before they become available on centralized platforms.Remember to carefully examine each freshly minted asset before dealing with it. Otherwise, you may be in danger of losing invested money. Look up the venture that issues your desired asset and:<ol><li>﻿Find its official site and look into the product roadmap&nbsp;</li><li>Check the white paper with all technical and economic aspects of the project;&nbsp;</li><li>Consider investigating whether the venture’s team is public and qualified;&nbsp;</li><li>Explore the venture’s social media presence: do they have social media? How often do they update these social media? How many active followers do they have? Is there a strong community around the project and do they use community channels such as Discord?</li><li>Do research on key opinion leaders who support the project;</li><li>Take a look at how the asset trades and check the pattern on trading volume. If it recently spiked and volume is trending higher, be careful! This may indicate that the project’s team is trying to artificially pump the price to further sell it at its peak.</li></ol>

Time to check how much you’ve learnt about the advantages of DEXs!

What types of DEXs are there on the market?

The flourishing DEX market is represented by platforms which implement various mechanisms to deliver the most innovative financial instruments. Discover the most common types of DEXs and differences between them.

This type of decentralized exchanges relies on order books, just like centralized exchanges do. Through them you get access to the record of all open buy and sell orders available for a particular cryptocurrency. Buy orders indicate that a trader is willing to purchase an asset at a specific price. Whereas, sell orders signify that another trader is ready to sell a certain price for the same asset.So if you want to purchase a crypto asset, all you need to do is to send its estimated price to the smart contract and wait until it finds the seller whose request matches you. After that, the DEX automatically exchanges two cryptocurrencies and the desired asset is credited to your wallet.And vice versa: if you want to sell your crypto, deposit it to the smart contract and wait until it finds suitable buyers. As an alternative, you can check the order book in search of a buyer manually, agree to the specified terms, and initiate an exchange.

These DEXs employ liquidity pools to determine and maintain asset pricing. Simply put, each time you buy a certain asset, the liquidity pool gradually increases its price. Whereas, each time the said asset is sold, the pool gradually decreases its price. This dynamic helps AMM-based DEXs remain autonomous.If you choose this type of decentralized exchanges, you’ll be able to make fast trades and receive crypto right to your crypto wallet – the process also referred to as swapping of assets.&nbsp;The credibility of AMM-based DEXs is determined by the total value of assets deposited to their smart contracts.

DEX aggregators collect liquidity from several DEXs simultaneously to minimize the difference between expected prices of trades and the prices at which the trades are completed. This difference is also known as slippage.&nbsp;In addition to that, DEX aggregators optimize asset prices and exchange fees, all while providing users with the best possible rates.Some of these platforms can also integrate to CEXs and aggregate liquidity from them, remaining non-custodial at the same time.

Check your knowledge of the most common types of DEXs

<ul><li>First, decide upon which blockchain the platform should be built, as each trade will require you to pay trading fees.&nbsp;</li><li>Then choose a crypto wallet that is compatible with the selected network and supports its native cryptocurrency. For example, to exchange digital assets on Ethereum-based DEX, you need to top up your wallet with ETH in an amount, which is sufficient for covering fees.</li><li>And finally, connect your wallet to the DEX of your choice.</li></ul>

Hurray! You have the necessary wealth of knowledge about DEXs and now you’re just one step away from making your first swap. Go visit <a href="https://app.uniswap.org/" rel="noopener noreferrer" target="_blank" style="background-color: transparent;">a DEX</a> and test your new skills!

Have you ever heard of a decentralized exchange? Well, Willow definitely has. She spends hours there every weekend because it’s the only spot in town that allows her to exchange crypto safely without any third parties. Now Willow will tell you about all kinds of decentralized exchanges and even share how to start using one.

DEX. How to convert your crypto without intermediaries

Technical innovation of stablecoins: why use them in Web3?

Cryptocurrencies like Bitcoin and Ethereum are conduits to the decentralized universe where you don’t need an intermediary to transfer and manage your money. Still, their prices can be unpredictable and prone to fluctuations. This means that Bitcoin and Ethereum are volatile, which is not always convenient for payment or storage purposes.&nbsp;Eventually, it became clear that Web3 users needed more stable assets that would empower them to transact without loss of value. Somewhat reminiscent of the U.S. dollar or euro, but existing entirely on blockchain.&nbsp;And such assets truly emerged in 2015, receiving the name “stablecoins”!&nbsp;

Stablecoins are digital currencies whose value is tied to a “stable” reserve asset like a fiat currency, a bond, a precious metal, or a commodity. For example, the pioneering stablecoins Tether (USDT) and USD Coin (USDC) are pegged to the U.S. dollar at a 1:1 ratio, meaning that 1 USDT or 1 USDC equals $1.

What is also crucial about stablecoins is that they are backed by different mechanisms maintaining their value. In this context, stablecoins are categorized into three groups.&nbsp;&nbsp;

These assets use reserves of fiat currencies (U.S. dollars in most cases) as collateral ensuring the stability of their peg. Such reserves are verified publicly by credible accounting firms and are being constantly audited.&nbsp;For instance, USDT and USDC are backed by dollar-denominated assets stored in segregated accounts with the U.S. financial institutions. The reserve assets have at least the same value as that of USDT or USDC in circulation.

As the name suggests, crypto-collateralized stablecoins are backed by other crypto assets. And since these reserve crypto assets may also be no strangers to volatility, these stablecoins are overcollateralized. In other words, the value of assets held as collateral exceeds the value of issued stablecoins, which insures users from sudden declines in the price of the former.Let’s walk through an example of Dai (DAI) to see how it’s applied in practice. While DAI is pegged to the U.S. dollar, it’s backed by Ethereum plus some other cryptocurrencies. The amount of all crypto used as collateral totals 150% of all DAI in circulation. This protects the stablecoin holders from a 25% drop in value of the reserve assets.&nbsp;

Algorithmic stablecoins don’t rely on any reserve assets, although some of them may have ones. Their value is maintained through a set of automated operations that increase or decrease their supply when necessary. This is similar to how central banks like the U.S. Federal Reserve issue traditional money.&nbsp;For example, one of the top-5 stablecoins in terms of liquidity Frax (FRAX) uses an algorithmic price stability mechanism.In the table below, there’re examples of the most common stablecoins with some core information about their mechanisms, issuers, and market capitalization.

Let’s see how much you have learnt about the basics of stablecoins!

Stablecoins are a great financial tool that helps to:<ul><li>﻿Stay afloat in volatile times. Just like traditional investors allocate a portion of their assets to cash or government bonds, crypto investors can allocate some of their funds to stablecoins.</li><li>Execute fast and efficient trades. Stablecoins allow crypto traders to carry out new transactions without having to wait for time-consuming fiat transfers to be completed.</li><li>Increase cryptocurrency liquidity. Stablecoins attract more and more new faces to the Web3 space. A steady growth in the number of crypto market participants leads to higher trading volumes and market capitalization. And that, in turn, causes better liquidity and market efficiency.</li></ul>

So among the most popular use cases for stablecoins are:<ul><li>﻿Minimizing volatility. ﻿If you plan to buy a stablecoin, you can stay assured that its price won’t rise unpredictably. Whereas, if you want to sell a stablecoin, don’t worry that its value will suddenly crash.&nbsp;</li><li>Storing value. The “stability” of stablecoins makes them another safe haven along with gold and high-yield bonds in times of market turmoil.</li><li>Transferring assets cheaply and internationally. ﻿Stablecoins can be easily transferred all around the globe, with transactions often incurring fees less than $1. It’s particularly useful if you need to send money to places where the local currency is volatile or where it’s difficult to obtain the U.S. dollar.</li><li>Earning passive income. Investing in stablecoins provides you with a range of easy ways to earn interest. This interest is typically higher than that you would generate with high-yield bank accounts.&nbsp;</li></ul>

Check your knowledge of the technical innovation of stablecoins!

In this section, you will learn about the most popular opportunities in decentralized finance where you can supply your stablecoins in exchange for some financial benefits.

Crypto platforms need stablecoins to maintain sufficient liquidity, which ensures instant transactions and fair pricing. Decentralized lending tools enable you to deposit your stablecoins, thus providing borrowers with access to this liquidity.&nbsp;And since stablecoins are consistently lent and borrowed, you get the opportunity to earn steady interest.

Provide liquidity to decentralized exchanges

Another option is to act as a liquidity provider (LP) for decentralized exchanges, also dubbed DEXs.&nbsp;Unlike centralized exchanges, DEXs are automated services that allow you to exchange crypto without intermediaries. In fact, when you trade on a DEX, you interact directly with the liquidity pool where other users keep their assets and cumulatively ensure liquidity that allows them to perform exchanges at any time.&nbsp;Are you willing to discover more about DEXs? Feel free to go visit <a href="https://edu.blocked.cc/trails/8/chapters/37" rel="noopener noreferrer" target="_blank" style="background-color: transparent;">this chapter</a>.﻿So if you want to provide liquidity, for example, for the USDT/ETH pairing, it means that you need to deposit equal amounts of USDT and ETH to a desired DEX. In exchange, you’ll get interest-bearing assets called LP tokens which represent your overall share in the pool.&nbsp;

Now when you know how to earn on providing liquidity to DEXs, you can also practice using several decentralized apps to multiply the yields you receive this way. This strategy is referred to as “yield farming”.Simply put, as a yield farmer, you can deposit your stablecoins to various DeFi applications for lending, borrowing, and trading. Then your deposited assets get locked into an autonomous smart contract that generates interest in return based on the contract rules.﻿To start earning, you need to top up your crypto wallet with desired stablecoins and connect it to the DeFi application of your choice.

Сheck your knowledge of the ways to earn with stablecoins

Today there are a myriad of centralized exchanges and crypto wallets that allow you to buy stablecoins with fiat currencies.

But in order to avoid any obstacles during the purchase, consider these recommendations:<ol><li>﻿If you buy stablecoins to deposit them to a decentralized application, make sure to purchase an asset on the right network. For example, if you plan to interact with a dApp powered by Ethereum, you’ll need an Ethereum-based USDT. Otherwise you’ll fail to make a deposit.</li><li>If you buy stablecoins for investing, trading or making transactions, do research on what blockchain these stablecoins are built upon. Getting back to USDT, it exists on Ethereum, TRON, Binance Chain, Polygon, and Solana simultaneously. This means that you can face different yields, as well as transaction fees and times.</li></ol>

A quick check on whether you are ready to purchase your first stablecoins!

Viola! Now you are ready to buy your first stablecoins and even make a profit with them. Go to your crypto wallet or a CEX right now – DeFi is calling!

Noah has always been frustrated about price fluctuations when buying crypto, he could never predict what will happen next. Until he discovered stablecoins. Now Noah uses all kinds of fiat-pegged assets and would like to introduce you to them too. He’ll also show you how to buy stablecoins and even make a profit off them.

How stablecoins are used in DeFi

Unlock the power of DeFi lending – grow your crypto holdings

With the emergence of decentralized finance, blockchain and cryptocurrency have proved to create a brand-new monetary system. This system allows for peer-to-peer interaction and redefines traditional financial tools in favor of decentralization.&nbsp;One such tool is DeFi lending – a common way to deposit crypto for some extra profit on top of ordinary asset-holding!

DeFi lending operates based on the combination of blockchain technology and smart contracts. With this investment tool at hand, people from all over the world can lend their money without interacting with a bank.﻿Instead, users can utilize DeFi lending platforms that automate all related processes. As a result, users benefit from faster transaction times and lower fees.Moreover, DeFi lending platforms ensure greater control over crypto deposits. In addition, they allow users to earn higher interest, thus making their digital assets a lucrative investment.&nbsp;

DeFi lending has been increasingly gaining popularity in recent years, and for good reasons:&nbsp;<ul><li>Privacy. With DeFi lending, users interact with open-source smart contracts instead of banks. Thus, there is no need to reveal personal information or go through verification procedures like Know-Your-Customer (KYC) or Anti-Money Laundering (AML).</li><li>Flexibility.With DeFi lending, users have the ability to create and customize their own loan terms, while interest rates are often set by the market supply and demand.&nbsp;</li><li>Transparency. With DeFi lending, users can forget about deceits and subjective decision-making during the loan approval process. Smart contracts ensure that everything is handled fairly and transparently.&nbsp;</li><li>Security. In DeFi, lenders don’t need to worry about losing their lent funds since borrowers willing to get a loan need to deposit collateral in a form of crypto assets. Smart contracts hold this collateral and send it to lenders in case borrowers fail to repay borrowed capital.&nbsp;</li></ul>

Take the test and find out how much you know about DeFi lending!

Now let’s go over the process of DeFi lending!A person who wants to lend crypto, a lender, deposits their funds to a certain DeFi&nbsp;platform. Think of it as depositing cash in a bank account.The smart contract utilized by this platform then combines the funds with other lenders. As a result, it creates a pool of money in a similar way to how a bank stores cash in a vault.The borrower can now access this pool and take out a loan based on the conditions laid out in the smart contract.&nbsp;

Smart contract terms cover things like:<ul><li>The loan amount defining how much can be borrowed;</li><li>The interest rate which is what borrowers need to pay to access the lent capital;</li><li>The loan period within which the loan must be repaid;</li><li>The collateral which serves as an insurance for lenders;</li><li>The loan liquidation threshold or the minimum amount of collateral needed to prevent its liquidation. Simply put, if the value of the loan goes beyond the loan liquidation threshold, smart contracts automatically repay the loan using collateral.</li></ul>These conditions are transparent and automated, so borrowers and lenders don't need to interact directly.&nbsp;

Do you really know how to lend crypto? Take our quiz to check it!

Now that you have a better understanding of DeFi lending, you may be wondering where to start. Let's take a deeper dive into some of the top DeFi lending platforms and explore how you can actually lend your crypto for interest.

What to consider before trying DeFi lending?

First of all, to get the most convenient experience that suits your goals and needs, look for the DeFi lending platforms with a:<ul><li>Strong reputation;</li><li>High security standards;</li><li>Track record of successful transactions.&nbsp;</li></ul>Also note that in order to enhance security, you should also diversify your investments across multiple platforms.&nbsp;Finally, try using stablecoins! These are cryptocurrencies pegged to the value of a more stable asset like the US dollar. This can help protect your investments from impermanent losses – the losses caused by sudden price swings.To discover the full potential of stablecoins, make sure to examine <a href="https://edu.blocked.cc/trails/8/chapters/38" rel="noopener noreferrer" target="_blank" style="background-color: transparent;">this special chapter</a>.

Let’s see if your knowledge is enough to try out DeFi lending!

<h2>Getting started with DeFi lending</h2>After you got a better understanding of all the benefits of DeFi lending, it’s time to put your knowledge into practice!&nbsp;<ol><li>Create an account on the DeFi platform of your choice and connect your wallet to it.</li><li>Select the token you want to lend from the list of available options. Remember when stablecoins eliminate the risk of impermanent losses.</li><li>Enter the amount of tokens you want to lend and click on the “Deposit” button.</li><li>Confirm the transaction and wait for the deposit to be processed.</li><li>Once the deposit is complete, you will start earning interest on your tokens immediately, and you can check the progress in the dashboard.</li><li>Some DeFi lending platforms allow you to unfreeze your funds at any time. Just click the “Withdraw” button, and the funds will be returned to your connected wallet.</li></ol>

Noah had always held onto her Bitcoin and Ethereum, hoping to sell them for a profit someday. But by lending her crypto for interest, she could earn a steady income on her investment. So she decided to give it a try.

How to lend your crypto for interest

How to transfer your crypto across blockchains with ease

The blockchain era started in 2008 when the innovative technology was introduced as part of a proposal for Bitcoin. For about 5 years its early proponents and missionaries have been using only one network until, in 2013, the world’s second blockchain named Ethereum saw the light of day. While Bitcoin allowed the transfer of digital money from one person to another, its new counterpart became more than just a cryptocurrency. Due to Ethereum’s programmable nature users could start building blockchain-based products themselves.&nbsp;This triggered the development of decentralized finance (DeFi) and the emergence of other blockchains. To date, there are at least 1000 different networks, each having its own unique features in terms of transaction fees, security, and scalability.&nbsp;And as you dive into the many exciting possibilities of the Web3 landscape, you'll find that the temptation to try different experiences is too strong to resist!&nbsp;

The existing variety of blockchains means a variety of financial tools to choose from depending on your needs and preferences. If you want to immerse yourself deeper in DeFi, you should consider exploring the possibility of cross-chain transferring your digital assets. Here are a few real-world examples of cross-chain transfers.

Sending an asset from one network to another

This can be useful for individuals who need to send or receive digital assets that are not supported on their current blockchain.Let's say you have a friend who is an avid gamer and loves collecting NFTs on the Ethereum network. You also have a valuable NFT, but on the TRON network, and you know that your friend would love to add it to their collection.

With each passing year, more and more decentralized applications are emerging across a wide range of networks. In case you’re interested in embracing the latest innovations, you may need cross-chain transfers to move the assets you need between different networks.&nbsp;For example, you've been using Ethereum for some time, but you've heard about a new DeFi project that's gaining popularity on Solana. And to take advantage of the opportunities it offers, you’ll be able to transfer a portion of your crypto from one blockchain to another.&nbsp;

Discovering possibilities offered by other networks

For day-to-day commerce with crypto, you’ll need to regularly commit low-value transactions. In terms of convenience, it’s important that those transactions are quite fast and incur low fees. To meet this demand, some blockchains offer better scalability. This means that they handle many more transactions in a given period of time without compromising their cost and speed.&nbsp;Let's imagine that, as an Ethereum user, you face a very high load on the network from time to time. As a result, you get frustrated with slow transaction times and high transaction fees. Then you discover that a different network named Polygon is far more scalable than Ethereum. So you decide to give it a try!

Sending your tokens to a liquidity pool on another blockchain

If you're looking to earn more rewards on your tokens, choosing a liquidity pool on a different blockchain can be a smart move. For example, a liquidity pool on Polygon may be over 3X more capital efficient than the same liquidity pool on Ethereum, allowing you to maximize your returns and grow your investment over time.In addition to potentially better interest rates, choosing a liquidity pool on a different network can offer other benefits such as lower transaction fees, better liquidity, and access to a wider variety of trading pairs.

Test your knowledge of transferring digital assets across blockchains!

How to transfer tokens between different chains

The main method of transferring tokens between different blockchains is known as cross-chain swapping. You can cross-chain swap your digital assets in multiple ways, each one having its own specifics.

One of the simplest ways to transfer tokens between different blockchains is to cross-chain swap them on a centralized exchange.Let’s say that you have some Tether (USDT) tokens on the Ethereum blockchain and you want to transfer them to the BNB Smart Chain (BSC). To do this, you can send your Ethereum-based USDT to Binance which integrates to both networks, cross-chain swap tokens, and then withdraw BSC-based USDT to a compatible crypto wallet. Currently, Binance allows for transacting stablecoins like USDT and USDC to 9 different blockchains.﻿The main advantage of this method is its simplicity. Additionally, centralized exchanges often offer higher liquidity and faster transactions, which can be useful if you're trading large amounts or executing time-sensitive trades.﻿Ready to exchange your crypto on a CEX? <a href="https://edu.blocked.cc/trails/1/chapters/3" rel="noopener noreferrer" target="_blank" style="background-color: transparent;">Our guide</a> has you covered!However, if you prioritize decentralization and security, keep in mind that you'll need to trust the centralized exchange with your assets and complete security checks to proceed with trading.

Let’s check whether you’ve learnt how to cross-chain transfer assets with CEXs!

This option doesn’t imply using an intermediary, which can reduce fees and increase security. The process involves using smart contracts to execute the swap, and it usually requires two parties to initiate the transaction.Here's an example: let's say Alice has some Ethereum tokens and wants to trade them for Bitcoin. Bob has Bitcoin and wants to acquire Ethereum. Instead of going through a centralized exchange, they decide to use a cross-chain swapping service.First, Alice and Bob both deposit their tokens into a smart contract. The smart contract checks that both parties have sufficient tokens to complete the transaction. Then, the smart contract transfers the tokens between the two parties on their respective blockchains. Finally, the tokens are in their crypto wallets and the transaction is complete.

Cross-chain DEX aggregators can connect to multiple blockchains at once. Thus, they collect liquidity needed to instantly switch between digital assets on different networks. Their automated algorithms find the best routes across various blockchain ecosystems, executing trades without significant changes in value of an asset.&nbsp;

Some crypto wallets enhance the utility of their built-in exchanges to offer cross-chain swaps. With such a tool at hand, you can transfer your digital assets from one blockchain to another in a couple of clicks.&nbsp;Although in-wallet cross-chain swaps are simple and fast, they can also be expensive, especially when your selected blockchain is particularly busy. Always make sure to have enough cryptocurrency for covering fees and purchase additional assets if necessary.&nbsp;

Cross-chain bridges are decentralized apps that facilitate transfer of assets between different blockchains. To make a swap, a user sends tokens to the bridge chain, and then gets the same tokens from a liquidity pool but they are already on the destination chain. Meanwhile, the bridge operator charges fees for transactions.&nbsp;The benefits of using blockchain bridges include increased interoperability, enhanced liquidity, and expanded access to new markets. However, there are also some things to think over, such as the need for trust in the bridge operator and the possibility of delays or errors in the transfer process.

How much do you really know about cross-chain swapping?

Now when you are ready to put your cross-chain swapping skills to the test, let's see what steps you need to take to complete your first cross-chain swap:<ol><li>First, connect your crypto wallet to the swapping service;</li><li>Choose the asset you want to swap and set its value;</li><li>The platform will automatically scan all existing routes to execute the swap and offer the fastest and cheapest options;</li><li>Select your desired swap route – keep in mind that some operators take a commission for processing transactions;</li><li>Deposit your tokens to the smart contract utilized by an operator;</li><li>Unlock the same tokens on a desired blockchain and withdraw them to a compatible crypto wallet.</li></ol>

Amy is a crypto enthusiast with a sizable stash of digital assets, but she has always been frustrated by the limited opportunities she had to grow her portfolio on a single blockchain. Alice decided to explore the world of cross-chain transfers. And now, she is eager to try out all the new opportunities that await her on different blockchains.

How to transfer crypto from one blockchain to another

Trading, lending, and everything else you need to know about DeFi

DeFi Basics

Born from DFINITY Foundation, ICP is more than just a blockchain; it's a visionary concept aiming to reshape how we interact with the internet and manage digital assets. Unlike traditional blockchains, ICP envisions a world where the internet itself becomes a colossal computer.Ready to step into the future? Welcome to the realm of Internet Computer Protocol (ICP)!

The Internet Computer is a decentralized network that adds autonomous serverless cloud functionality to the public Internet – making it possible to build almost any system or service entirely on the blockchain using “canister software,” an evolution of smart contracts.

Central to ICP's ethos is a commitment to decentralization. Beyond mere promises, ICP implements various mechanisms for decentralization across network validation, architecture, governance, and the way applications are built.What you build here lives 100% on-chain. This is possible due to the concept of Canisters, a fundamental unit of computation on the ICP network and a new kind of smart contracts software that can be used to build anything.

ICP's design is inherently interoperable. It can communicate with other blockchains and even traditional internet services seamlessly. This means that ICP-powered smart contracts can interact with smart contracts on other networks, making ICP a hub for cross-chain activities.

The Network Nervous System (NNS) is the autonomous software that governs the Internet Computer blockchain.See it as a boss who takes care of important decisions, such as how the network works and grows. The NNS lets people vote on ideas, like adding new parts to the network or making changes.It's a big, open system, and anyone with ICP tokens can join in. If you lock your tokens for a while, you can vote and earn rewards. It's like a big meeting where everyone has a say in how things happen!

ICP's audacious vision is to create a decentralized Internet where applications are hosted on a global network of independent data centers. This vision challenges the status quo of today's centralized internet infrastructure and promises greater user privacy, security, and control.

A World of Possibilities for Everyone with ICP

From the standpoint of developers and entrepreneurs, ICP opens up a world of possibilities. It allows for the creation of a new generation of applications that can scale effortlessly while retaining the security and trust of blockchain technology. Whether you're dreaming of launching a DeFi platform, a secure identity management system, or a next-generation social network, ICP provides the foundation to make those dreams a reality.

If you're new to the crypto world, you might be curious about the Internet Computer Protocol (ICP) and its innovative approach to blockchain, smart contracts, and decentralized applications.

Journey into the Internet Computer

Forget walled and siloed ecosystems, the Internet Computer (ICP) is carving a different path in the blockchain &amp; crypto industry, one paved with seamless integrations and interoperable ecosystems. In a world obsessed with individual chain maximalism, ICP is the rogue ambassador, building bridges and connecting across blockchain borders through ChainKey (ck) cryptography.

ckBTC: Bitcoin Integrated on the ICP Ecosystem

Embark on a journey with ICP's Multi-Chain Future: Unveil the transformative power of ckBTC and ckETH in the blockchain realm. Discover how ICP's innovative ChainKey technology fosters seamless integration and interoperability, breaking the bounds of traditional blockchain limitations. Get ready to explore a new era of decentralized finance where collaboration and innovation are at the forefront.

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