DeFi (decentralized finance) is a category of digital financial products built upon blockchains. DeFi allows everyday investors to invest in new asset classes, save money on transaction fees, and enhance their returns by eliminating regulatory entities from the equation.
You’ll need digital assets to invest in DeFi protocols just as much as you’ll need cash to invest in equities or real estate, and there’s no better way to get them than through a cryptocurrency exchange. CoinSmart is the best cryptocurrency exchange in Canada, and with its security, simplicity of use, and extremely low trading fees, I can’t recommend it highly enough.
What Is DeFi?
DeFi (decentralized finance) refers to entrepreneurs and innovators working together to re-create traditional finance in a decentralized manner outside of government and corporate influence.
This category of digital financial products got its name from the fact that they’re based on blockchains. Blockchains are decentralized databases that keep track of transactions, and are not regulated or managed by any single person or entity.
Blockchains allow for protocols to be built inside them. Protocols (also known as “smart contracts”) are code-based agreements that contain all of the pertinent information about a transaction. People can buy, sell and trade cryptocurrencies, lend and/or borrow digital assets, join liquidity pools, and do plenty more thanks to smart contracts.
Bitcoin and Ethereum were the first DeFi-friendly cryptocurrencies to exist, but the DeFi world has changed quickly over the years. The end goal of this shift is to be able to replace every sort of financial instrument, not just money.
DeFi enables everyday investors to access new asset types, save money on fees, and improve returns by cutting out costly middleman.
How To Invest In DeFi In Canada: A Quick Guide
Here are the steps you need to take to start investing in DeFi products in Canada:
#1 Choose A Crypto Wallet
The first step you’ll need to take to invest in DeFi is to get a personal crypto wallet. A crypto wallet is a digital place where you can store your cryptocurrencies, and you’ll also need to connect your wallet to a protocol in order to spend your digital assets later.
There are three different types of crypto wallets, but for the sake of this guide, I’ll be focusing on two: hardware wallets (also known as cold wallets) and software wallets (known as hot wallets). Hardware wallets are physical devices that look like USB sticks, while software wallets are software that is inside your computer or phone.
Generally, cold wallets are much harder to hack and/or steal, which is why they’re considered safer.
#2 Buy Ethereum Tokens Using A Crypto Exchange
You need digital assets to participate in DeFi protocols just as much as you need money to invest in stocks or real estate. Because most protocols are based on Ethereum, I also recommend using Ether or ERC-20 tokens to get started.
There are plenty of crypto exchanges in Canada that make buying Ethereum easy. Here are some of our top Canadian crypto exchange picks:
CoinSmart is a great option for Canadians seeking a reliable, trustworthy crypto exchange. CoinSmart’s trading fees are just 0.2%, they offer excellent customer support available 24/7 via phone, live chat and email, and user accounts are verified instantly.
CoinSmart has been designated a Registered Marketplace by the Ontario Securities Commission (OSC), which means they’re a highly secure exchange. They also maintain a 95% cold storage policy, which keeps your crypto extra safe across all circumstances.
As a new CoinSmart user, you’ll receive a $50 bonus upon funding your account, which you can use to buy Bitcoin, Ethereum, or any of the 16 assets CoinSmart supports. If you’re looking for a highly secure, reputable exchange, CoinSmart is an excellent choice.
- Extremely low trading fees (0.20%)
- 24/7 customer support available via phone, live chat or email
- Instant account verification
- Supports 16 cryptocurrencies
- Registered Marketplace by the OSC
- Trade all altcoins directly
- Immediate deposits and withdrawals
- User-friendly for both beginners and advanced traders
- 95% cold storage policy keeps your crypto extra secure
- Account Opening: Free
- Trading Fees: 0.20%
- INTERAC Deposit: 0%
- Bank Wire Deposit: 0%
- Bank Wire Withdrawal: 1.00%
- EFT Withdrawal: 1.00%
$50 bonus when you sign up using this link
Investors looking for top-level security and instant account verification.
Bitbuy’s trading fees are an impressive 0.20%, and just 0.1% for Pro users. It supports 17 cryptocurrencies, verifies accounts instantly, prides itself on its helpful customer service reps, and has a beautiful, well-rated app.
For a limited time, Bitbuy is offering a $50 bonus to new users who fund their account with $250 or more.
You can fund your Bitbuy account directly from your bank account via INTERAC e-transfer or bank wire, with all account deposits and withdrawals executed quickly. It’s processed more than $4 billion in trades across its 350,000+ Canadian users.
Bitbuy is a Registered Marketplace and Investment Dealer, as recognized by the Ontario Securities Commission (OSC). This means that the OSC has recognized Bitbuy as a highly safe and secure exchange, and that it offers deep liquidity for all order sizes.
If you’re looking for a highly-respected exchange that offers altcoin trading, excellent customer service, and a slick mobile app, Bitbuy is for you.
- Extremely low trading fees (0.10% – 0.20%)
- Easy to use for both beginners and advanced traders
- Supports 17 cryptocurrencies
- Excellent customer support
- Powerful mobile app (rated 4.6/5 on the App Store)
- 99% cold storage policy keeps your crypto extra secure
- Account Opening: Free
- Express Trading Fees: 0.20%
- Pro Trading Fees: 0.10% to 0.20%
- INTERAC Deposits/Withdrawals: 1.50%
- Bank Wire Deposit: 0.50%
- Bank Wire Withdrawal: 1.00%
$50 when you deposit $250 using this link.
Investors looking to trade with extremely low trading fees.
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Crypto.com is a major global player that brings a mature, proven exchange to Canadian crypto investors. It supports 100+ cryptocurrencies, making it an ideal fit for anyone looking to invest in undiscovered altcoins before the masses.
Crypto.com offers some unique features that no other Canadian cryptocurrency exchanges can match. Users can trade options and futures contracts, earn interest by staking their coins, and make trades with up to 10x leverage when they feel particularly confident in a coin.
Crypto.com also has invested an enormous amount of money into its platform security, which makes trading with them extremely safe. The exchange is lightning quick (prices update dozens of times per second), which gives day traders an upper hand over the rest of the market.
Overall, Crypto.com is a solid exchange for investors looking to cash in on brand new altcoins. If you’re just looking to buy more mainstream coins like Bitcoin and Ethereum, though, I suggest either Bitbuy or CoinSmart instead.
- Average trading fees (0.4%)
- Supports 100+ cryptocurrencies
- Allows up to 10x leverage
- Trade crypto derivatives (futures and options contracts)
- Earn daily interest by staking your coins
- Purchase newly-listed coins at up to 50% off
- Free deposits from all cryptocurrencies
- Account Opening: Free
- Trading Fees: 0.4%
Investors looking to buy altcoins and other new crypto assets before they go mainstream.
OPEN FREE ACCOUNTExtremely secure, 10x leverage
#3 Choose A DeFi Protocol To Use Your Ether In
The last step you need to take to invest in DeFi products is to choose a protocol based on the investment strategy that you’re interested in.
Like I’ve mentioned before, some protocols allow you to lend, trade, stake, and participate in liquidity pools where you’ll receive payments when transactions are made in your pools as a reward. However, some protocols allow you to participate in yield farming, which entails earning interest as a result of your participation on a loan.
When using a protocol, the typical procedure is to go to the protocol’s website or app, link your wallet so that their platform can access your Ether tokens, and follow their instructions to start doing what the protocol was designed for, whether it’s lending, trading, or yield farming.
Top 5 DeFi Protocols To Invest In
Here are some of the most popular DeFi protocols that you can invest in right now:
Aave is one of the most well-known and prominent decentralized finance protocols. The protocol relies on its native token, AAVE, as a security measure for the protocol and as a way for users to contribute to the protocol’s governance.
Users can earn AAVE rewards by staking their tokens through the protocol’s Safety Module.
yEarn is an automated liquidity aggregator that also offers a variety of options for yield farming.
The protocol’s native token, YFI, is in charge of the protocol’s governance. Users may stake YFI tokens for participating in the protocol’s governance and receiving a pro-rata cut from the protocol’s fees.
Synthetix is one of the most prominent derivative DeFi protocols around today. It has its own native cryptocurrency, known as SNX.
Users must stake at least 750% of the value of new derivatives created, known as Synths, with SNX tokens to mint them. This proportion is known as cRatio, and it helps users earn native inflation alongside a share of the protocol’s trading fees.
The most popular protocol for lending is Compound. It has a native digital asset, called COMP, which users can earn by lending or borrowing funds.
The Compound Governance Dashboard gives COMP the ability to make strategic protocol decisions while retaining democratic control by allowing users to vote and delegate through it.
Another important entrant among the most well-known DeFi protocols today is Uniswap. It is presently the biggest decentralized exchange in the field.
Users can obtain the native token, UNI, by providing liquidity to certain pools. Uniswap launched a program in September 2020 called “Universal Basic Income” that rewarded previous users with 15% of its UNI supply.
The DeFi world has been evolving at an accelerated rate over the last couple of years. It’s still in its infancy, but there is no better time than right now to get on board with this new financial system that rewards investors with access to new asset types, improved rates and fewer fees.
You’ll need digital assets to invest in DeFi protocols just as much as you’ll need money to invest in stocks or real estate, and there is no better approach to acquire them than using a cryptocurrency exchange. CoinSmart is the best among the many crypto exchange options available to Canadians, and with its security, ease of use, and lowest trading fees in the industry, I simply can’t recommend CoinSmart enough.