Invest In Defi On Coinbase: A Beginner's Guide

Decentralized finance (DeFi) is an umbrella term for peer-to-peer financial services on public blockchains, primarily Ethereum. With DeFi, you can do most of the things that banks support—earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more—but it's faster and doesn't require paperwork or a third party. DeFi is accessible to anyone with an internet connection and is global, pseudonymous, and open to all.

To invest in DeFi on Coinbase, you need to download the Coinbase Wallet, which is available as a mobile app and browser extension. After setting up your Coinbase Wallet, you will need to choose a username and securely store your recovery phrase. Once you've added ETH to Coinbase Wallet, you can swap your ETH for DeFi right in the mobile app or browser extension.

How to buy Defi on Coinbase Wallet

Firstly, you will need to download the Coinbase Wallet, which is available as a mobile app or browser extension. This is a self-custody wallet that puts you in control of your crypto, keys, and data.

Next, you will need to choose a username for your Coinbase Wallet. This will allow other Coinbase Wallet users to send you crypto. You can keep your username private, but you will need it to access your account.

When you create a new self-custody wallet, you will be given a recovery phrase that consists of 12 random words. This recovery phrase is the key to your crypto, so it is important that you do not share it with anyone. It is recommended that you write these words down on paper and store them securely, as well as using the cloud backup feature.

Now you can start to think about purchasing Defi. You will need to buy and transfer Ethereum (ETH) to your Coinbase Wallet. If you don't already have a Coinbase account, you will need to create one to buy ETH. Once you have added ETH to your Coinbase Wallet, you can swap it for Defi in the mobile app or browser extension.

Tap or click the "Swap" icon in the Assets tab, then select "Choose asset" and pick Defi. Input the amount of ETH you'd like to exchange for Defi, remembering to leave enough for transaction fees. Confirm your purchase and follow the on-screen instructions to finalize.

Important things to note:

• Fees vary based on how busy the network is, how complicated the transaction is, and how fast you'd like the transaction to be completed.
• At the time of writing, credit cards cannot be used to purchase ETH in order to trade or swap for Defi.
• Defi is not currently available on Coinbase’s centralized exchange in the United States.

Understanding Ethereum network fees

To understand Ethereum network fees, it is important to first understand the concept of "gas". Gas is the unit of measurement for the amount of computational effort required to execute specific operations on the Ethereum network. Since each Ethereum transaction requires computational resources to execute, these resources must be paid for to ensure the network's security and functionality. This payment is made in the form of a gas fee.

The gas fee is calculated by multiplying the amount of gas used by the cost per unit of gas. The fee must be paid regardless of whether a transaction succeeds or fails. Gas fees are paid in Ethereum's native currency, ether (ETH), and gas prices are usually quoted in gwei, which is a denomination of ETH. One gwei is equal to 0.000000001 ETH or 10-9 ETH.

The total gas fee paid by a user is divided into two components: the base fee and the priority fee (tip). The base fee is set by the protocol and must be paid for a transaction to be considered valid. The priority fee is a tip added to the base fee to incentivize validators to include the transaction in the next block. The higher the priority fee, the more likely the transaction will be included in the next block.

The amount of gas required for a transaction depends on the type of operation being performed. For example, a standard ETH transfer requires a gas limit of 21,000 units of gas. More complex transactions, such as smart contract executions, may require a higher gas limit.

It is important to note that gas fees can vary based on network demand. During periods of high demand or congestion on the Ethereum network, average fees tend to spike. Additionally, the complexity of a transaction and the desired speed of completion can also impact the final fee.

When planning to invest in DeFi on Coinbase, it is crucial to understand and plan for these Ethereum network fees. While the fees may vary, it is generally recommended to set aside a sufficient amount of money to cover the costs.

How to buy Defi with PayPal

DeFi is not currently available on Coinbase’s centralized exchange in the United States. However, you can still buy DeFi on Coinbase Wallet, your key to the world of crypto. Here is a step-by-step guide on how to buy DeFi using Coinbase Wallet:

Step 1: Download Coinbase Wallet

To purchase DeFi, you will need a self-custody wallet like Coinbase Wallet. You can download the Coinbase Wallet as a mobile app or browser extension.

Step 2: Choose a Coinbase Wallet username

When setting up your Coinbase Wallet, you will be asked to choose a username. This username will allow other Coinbase Wallet users to send you crypto easily. You can keep your username private, but you will need it to access your account.

Step 3: Securely store your recovery phrase

When creating a new self-custody wallet, you will be given a recovery phrase consisting of 12 random words. This recovery phrase is the key to your crypto, so it is important to keep it secure and not share it with anyone, including Coinbase. It is recommended that you write these words down on paper and store them securely, as well as using Coinbase Wallet's cloud backup feature.

Step 4: Understand and plan for Ethereum network fees

The fees for your transaction will vary based on how busy the network is, the complexity of the transaction, and how quickly you want the transaction to be completed. It is important to plan and set aside money for these fees.

Step 5: Buy and transfer ETH to Coinbase Wallet

If you don't already have a Coinbase account, you will need to create one to buy Ethereum (ETH). Once you have done this, you can buy ETH and transfer it to your Coinbase Wallet. The way you transfer ETH to your Coinbase Wallet will depend on whether you are using the mobile app or the Chrome extension.

Step 6: Use your ETH to buy DeFi

Once you have added ETH to your Coinbase Wallet, you can swap it for DeFi right in the mobile app or browser extension. Tap or click the "Swap" icon in the Assets tab, then select "Choose asset" and pick DeFi. Input the amount of ETH you want to exchange for DeFi, remembering to leave enough for transaction fees. Confirm your purchase and follow the on-screen instructions to finalize.

Buying DeFi with PayPal

Currently, only US customers can buy DeFi or add US dollars using PayPal. All other customers can only use PayPal to cash out or sell, and transaction availability depends on the region.

While you can use PayPal as an alternative means for withdrawing funds from exchanges such as Coinbase, it does not appear that you can directly purchase DeFi with PayPal at this time. However, you can use PayPal to buy Ethereum on a dedicated crypto app, and then exchange your ETH for DeFi on Coinbase Wallet.

Some of the best platforms to buy Ethereum with PayPal include:

• Exodus: Top crypto wallet that supports PayPal transactions and offers access to cross-chain token swaps.
• Binance: Global exchange known for its extensive range of cryptocurrencies and fast, secure transactions.
• Coinbase: Widely-used and reliable platform suitable for beginners and experienced traders.
• Bitstamp: One of the oldest and most reliable exchanges, known for its PayPal integration.
• Plus500: CFD trading platform that supports PayPal deposits. Allows you to trade Ethereum without owning it.

When buying Ethereum with PayPal, it is important to consider factors such as trading experience, transaction fees, trading volume, security, and regulatory compliance.

Step-by-Step Guide to Buying Ethereum with PayPal on the PayPal Platform:

• Open the PayPal app and log in.
• Navigate to the cryptocurrency section by clicking on the crypto tab.
• Select Ethereum and enter the amount you wish to purchase. Review the details and fees, then click "Buy."
• Confirm the transaction.

While the PayPal platform offers simplicity, you may find broader options and potentially lower fees on dedicated cryptocurrency exchanges.

How to buy Defi with a credit card

Step 1: Create a Coinbase Account

Coinbase is a popular and safe crypto wallet that can store leading cryptocurrencies such as Bitcoin and Ethereum (ETH). You can create an account on the Coinbase website or mobile app.

Step 2: Buy Bitcoin with Your Credit Card

Once your Coinbase account is active, you can buy Bitcoins instantly with your credit card. You will need to verify your personal identity before making the purchase.

Step 3: Create an Account on a Crypto Exchange Platform

You will need to choose a reliable cryptocurrency exchange platform that accepts Defi exchange. We recommend Binance as your first crypto exchange platform. Create a Binance account on their website.

Step 4: Transfer Your Bitcoin to Binance

Log in to your Binance account and go to the Deposit Page. Search for BTC in the top-left search bar and click the Deposit button. Copy your Bitcoin deposit address string. Log in to your Coinbase account, go to the Send/Request Page, and paste the Bitcoin deposit address string into the recipient field. Make sure the address is correct as you cannot reverse the transaction.

Step 5: Exchange Bitcoin for Defi

It may take 15 to 30 minutes for your Bitcoin transaction to complete. Once it is done, go to the Binance Exchange Page and search for DEFI in the top-right search field to get the trading pair for Defi and Bitcoin. You can then buy Defi with Bitcoin in the exchange tab.

Important Things to Note

• Fees to trade Defi depend on Ethereum network fees. There are several factors that affect fees, including how busy the network is, how complicated your transaction is, and how fast you'd like to complete the transaction.
• When exchanging for Defi, be sure to leave enough ETH in your Coinbase Wallet to account for the 1% transaction fee for all swaps.
• At this time, credit cards cannot be used to purchase ETH in order to trade or swap for Defi.

How to buy Defi with a gift card

To buy Defi with a gift card, you will need to follow a few steps. Firstly, you will need to purchase a digital gift card from an online merchant. These gift cards are currently only available in the US, excluding Hawaii. After purchasing the gift card, you can redeem it on your Coinbase account.

Once you have redeemed your gift card, you can use the balance to buy Defi. Here are the steps to buy Defi on Coinbase:

• Download the Coinbase Wallet: To purchase Defi, you will need a self-custody wallet like the Coinbase Wallet. You can download it as a mobile app or browser extension.
• Choose a username: When setting up your Coinbase Wallet, you will be asked to choose a username. This username will allow other Coinbase Wallet users to send you crypto easily. You can keep your username private, but you will need it to access your account.
• Secure your recovery phrase: When creating a new self-custody wallet, you will receive a recovery phrase consisting of 12 random words. This phrase is the key to your crypto, so do not share it with anyone. It is recommended to write it down on paper and store it securely.
• Understand Ethereum network fees: The fees for trading Defi depend on various factors, such as network congestion, transaction complexity, and desired transaction speed. Be sure to set aside enough money to cover these fees.
• Buy and transfer ETH to your Coinbase Wallet: If you don't already have a Coinbase account, you will need to create one to purchase Ethereum (ETH). Once you have ETH in your Coinbase account, transfer it to your Coinbase Wallet.
• Use your ETH to buy Defi: In the Coinbase Wallet app or browser extension, go to the "Swap" icon in the Assets tab. Select "Choose asset" and pick Defi. Enter the amount of ETH you want to exchange for Defi, ensuring you leave enough for transaction fees. Confirm your purchase and follow the on-screen instructions to finalize the transaction.

Please note that while you can use a gift card to purchase Defi on Coinbase, credit cards cannot be used to buy ETH for this purpose at this time.

Frequently asked questions