In the early months of 2019, DeFi and Defi wallet became popular. People were dumping their regular bank accounts used for business transactions for DeFi wallets because of the many limitations attached to the traditional banking system.
Before DeFi, financial transactions involved third parties, and we all relied solely on banks and their serious charges.
And when DeFi came through- the era of Decentralized Finance, it changed our financial transaction system.
This article covers what DeFi entails, DeFi wallet usage, how to transfer money from DeFi wallet to your bank account, and so much more.
You won’t find all the information shared here in one article, but we specifically put everything you need in place for you.
Read on to learn what’s in DeFi for you.
What is Decentralized Finance
DeFi is an emerging technology that replaces the need for third parties and the traditional banking system for financial transactions.
In the centralized banking system (Banks), an intermediary has to validate your transactions, but with DeFi, you do not need any third party to make any financial transactions.
With decentralized finance, you can hold your money in your DeFi wallet, make business transactions, and keep your cash secure.
There is also no limit to the amount of money you can keep in your DeFi wallet, unlike the traditional centralized system that limits your transactions and funds, making you go through many protocols to access your funds.
So, What’s in store for you?
Benefits of using DeFi
Using DeFi has its benefits, such as
Accessibility
You do not need to go to the bank to conduct transactions or face network issues when getting money across to anyone worldwide.
DeFi allows you to conduct transactions with any demographic without the stress of going through many unending processes.
Low transaction fees
With this innovative technology, DeFi, you make transactions without excessive charges, especially for international transfers.
Security
DeFi wallets are more secure than our regular bank accounts for financial transactions. DeFi transactions are open to everyone and alter the transaction history.
Note that your identity is not exposed, although the transactions are open to the public.
No need for intermediaries
DeFi transactions do not require a third party or financial institutions. No monetary authority foresees your transactions and limits how much you can spend.
So, how is money saved in DeFi?
DeFi Wallet
In the traditional financial system (Banks), we open accounts, get an account number and add funds to our bank accounts. Opening and getting an account number also applies to Decentralized Finance, DeFi, but instead of bank accounts, we have “DeFi wallets.”
DeFi Wallet is a decentralized application that stores crypto assets like you hold money in your bank accounts. By crypto assets, I mean Cryptocurrencies and NFTs.
With DeFi wallets, you are the only one with access to your crypto assets, unlike your bank accounts which your bank manager and the full financial authority of your bank can access.
The sole aim of DeFi Wallet is accessibility and security. With a DeFi wallet, you can access your funds and make transactions without any third party validating your transactions.
You will also have complete control over your asset and can make transactions without a limit.
To own a DeFi wallet, you do not need to provide IDs or driver’s licenses. It doesn’t require any form of verification of identity
Furthermore, if you want to open a DeFi wallet to store your crypto assets, some DeFi wallets top our list based on security and user-friendliness.
Top DeFi Wallets
There are a variety of DeFi wallets, and your priority should be security.
It is also essential to conduct proper research before deciding on the DeFi wallet you want to store your crypto assets.
Here are the DeFi wallets that made it to our list
Metamask Wallet
It is available on Play Store and App Store. You can use Metamask Wallet on both smartphones and computers.
Argent
Argent is highly user-friendly. You don’t need to be a blockchain expert to understand Argent.
Argent also has a unique security feature that allows you to add a guardian to help you recover your seed phrase and private keys if it gets missing.
Coinbase
Coinbase is also user-friendly. It is the easiest to use for financial transactions. Your private key is stored on your device, so you can easily retrieve it if lost.
You can go with these on the list depending on your usage and personal preference.
Furthermore, to everything, there are advantages and disadvantages.
Let’s review the advantages and disadvantages of using a DeFi wallet.
Pros and Cons of Using a DeFi Wallets
There are two sides to every coin, and DeFi wallets are no exception.
Pros
- You can easily carry out transactions with different demographics
- High-security measures
- A means of income generation, especially for those looking to invest in cryptocurrency
- You do not need a third party to carry out transactions.
- There is no limit to the number of daily transactions.
Cons
- It is complex for total newbies.
- Lack of customer support in case you want to review your account activities.
With all these, you can decide on opening a DeFi wallet.
Let’s get answers to a question people always ask.
Are DeFi Wallets Safe?
Crypto and Web 3.0 enthusiasts believe that DeFi wallets are safer than centralized financial institutions because, in DeFi, you are responsible for the safety of your wallet.
You have complete control and can take extra care of your crypto assets, unlike the traditional financial system, where authority is in charge of what happens in your account.
The Point here is that with DeFi wallets, you must keep your private keys(12-24 features) safe. You don’t share it with anyone, not even your most trusted friend, and if you lose it without a recovery phase, you’ll lose all your crypto assets.
So, keep your keys safe. Stay out of Ponzi schemes, and do not click on links that are not verified.
Your DeFi wallet’s safety is dependent on how responsible you are.
Now, let’s say your wallet is secure, and you have crypto in your DeFi wallet. How do you transfer it to your bank account?
How to transfer money from your DeFi wallets to your Bank account
You’ll find it difficult or impossible to transfer money from your DeFi wallet directly to your bank account, and that’s why we have added this aspect to the article.
You must use a crypto exchange platform to convert your cryptocurrency into Fiat (USD, Euro).
Here’s a detailed procedure on how to go about it;
- Open an account in a crypto exchange, e.g., Binance, Coinbase
- Link your DeFi wallet holding your cryptocurrency to the crypto exchange account you created.
- Select the cryptocurrency you want to exchange (Ether, e.g.) and the one you wish to receive (USD, e.g.)
- Create a “spot trade” order to help convert your crypto to the fiat you have selected at the current exchange rate.
- Look for the “transfer” or “withdrawal” option in your exchange account. It will display instructions to transfer your money to your bank account.
- The name on your bank account and crypto exchange should tally. If it doesn’t, the transaction will not be successful.
- Finally, you can verify your transfer by checking to confirm the transaction’s success.
With these simple procedures, you transfer crypto from your DeFi wallet to your bank account.
Easy right?
Conclusion
At first, it may be challenging to use a DeFi wallet for transactions, but with time you’ll get it right, especially with the help of this article.
We covered the most crucial information about DeFi and DeFi wallet and did justice to it.
An extra tip is to ensure you secure your DeFi wallet from theft and do further study alongside what we provided in this article.
On our list of top DeFi wallets, we only mentioned three DeFi wallets, but there’s room for you to add yours in the comment section.
Drop your questions and extra points, and we’ll discuss it.
Finally, we hope you can now understand the workings of DeFi and how to transfer money from your DeFi wallet to your bank account.
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