Basic concepts for starting in DeFi with Oh! Finance (part 1/3)
As stated in the previous article, getting in crypto just means a computer/mobile phone, access to the internet and not being blocked to access crypto websites/applications. Everything happens electronically, no paper trail. It may feel very IT driven, which it essentially is on the technical level, but once you have mastered the basics and some key concepts, it’s quite easy to navigate in the crypto world.
What are some of the basics?
- Crypto wallet address
- Wallet address and blockchains
- CEX or (vs?) DEX/DeFi
- Gas token and transaction fees
- Smart contract
- Token contract address
Crypto wallet address
A crypto wallet has more similarities with a bank account than a real world wallet in your pocket. All your token transactions linked to your crypto wallet are registered on the blockchains: Buying, selling, lending, depositing, withdrawing, etc.
A crypto wallet is online and characterized by a unique address which belongs to you at its creation. You can create as many separate crypto wallet addresses as you wish. They are managed through wallet apps on smartphones or browser extensions. Popular apps for Decentralized Finance (= “DeFi”) are MetaMask, Coin98, Trust Wallet, etc. In this article, we won’t mention physical wallets (called “ledgers”).
The base functionality of a wallet app is to serve as an interface to show you how many assets you hold on the blockchain, access to the transactions history and approve transaction requests. It fetches the data from the blockchain, it doesn’t store the data locally on your device. Similar to a banking app, which reads the data from the bank system, but which is 100% centralized and proprietary to the bank. In DeFi, any wallet app compatible with the blockchain retrieves the same information.
You can have the same wallet address accessible on different devices. You don’t even need to have the same wallet application on all your devices: For example, you can use Trust Wallet on your mobile phone and MetaMask on your computer linked to the same wallet address. Both apps will show the same tokens holding on each blockchain since they fetch the same information.
The alphanumeric wallet address is what is known to the world, same as a bank account number:
- You give your wallet address when someone wants to deposit tokens into it.
- You ask for the wallet address of someone when you want to withdraw tokens from your wallet and deposit into their wallet.
- When you are interacting with an application like Oh! Finance, all the transactions will be linked to your wallet, similar to financial transactions linked to your bank account.
Custody: Seed phrase of a wallet address
For a bank account, your custody is defined by your real identity and your home address.
The creation of a new wallet is characterized by a unique “seed” phrase (list of words in a random sequence) which generates a unique address made of alphanumeric characters. You don’t need to provide any official identity (no ID card/passport, picture, proof of address … nothing!).
Knowing the seed phrase is equal to proving that you are the custodian of that particular wallet address. A stranger knowing the seed phrase means (s)he can drain the wallet empty.
The seed phrase is essential to recover your wallet when you need to reinstall the wallet app for example or to install a second wallet app on another device linked to the same wallet address. Never communicate the seed phrase to someone you don’t trust (and certainly never to strangers online), store it safely. Just consider that the seed phrase must have the same privacy level as the pin code of your bankcard, except that it’s much harder to remember and you can’t change it, ever.
Blockchains and wallet address
We won’t address the nuances of EVM compatibility. For simplicity, we will explain with the wallet app MetaMask (one of the most popular DeFi crypto wallet app) and compatible blockchains. MetaMask supports the Ethereum and Avalanche blockchains, ideal for Oh! Finance.
A wallet app reads the info from one blockchain at a time: You toggle blockchains in the wallet app to interact with the selected blockchain. The wallet address will stay the same regardless of which EVM compatible blockchain you have selected in MetaMask. There is also a functionality to create several wallet addresses linked to the same seed phrase.
In the case of Oh! Finance, you will interact with the Avalanche blockchain.
About OH! Finance
Oh! Finance is an optimized yield-generation protocol, focused on reducing risk and increasing volume exposure. Start earning industry-leading interest rates on stablecoins in just a few clicks: https://oh.finance
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