The recent fall of FTX comes with devastating consequences to many, cooling the conditions of an already chilly crypto winter. While the loss of consumer funds and the drop in crypto prices across the board are detrimental to many in the new-age financial system, it’s the anticipation of regulators’ reactions that are adding to the hysteria. 

After taking a deep dive into exactly what happened at FTX, we take a look at the response from regulators and what this is likely to mean for the greater crypto industry in terms of regulations.

The FTX death spiral and its effects on the crypto financial system

The history

To understand the full demise of FTX, one needs to understand its history. In 2019, when FTX launched, Binance was a prominent investor and partner. CEOs, Sam Bankman-Fried (FTX) and Changpeng Zhao (Binance) had a mutually beneficial strategic partnership and amicable relationship.

This soured as FTX grew in size and they became the two top centralized entities in the crypto ecosystem, and ultimately largest competitors. In 2021, both exchanges accounted for roughly 30% of trading volume on crypto exchanges, accounting for over $27.5 trillion. 

The breakup

That same year, things reached a pinnacle point in their relationship and FTX bought Binance out of the partnership, paying $2.1 billion, much of that with FTT, the platform’s native token. Fast forward to November 2022: Changpeng Zhao (CZ) tweeted that he would be liquidating the FTT crypto assets as a result of Sam Bankman-Fried speaking ill of Binance to regulators and other “recent revelations”. 

The allegations

It is believed these revelations were that FTX’s sister trading company, Alameda Research, was in financial trouble, an allegation made by Coindesk and Mike Burgersburg, the man who accurately predicted the Celsius crash. At this point, we should mention that Alameda and FTX’s combined FTT holdings account for 75% of the entire supply. 

With Binance announcing that they were going to sell their crypto assets, accounting for 7.4% of the entire FTT supply, shockwaves were sent through the industry. 

The consequences

In a matter of hours, the FTT price dropped 83%, trading at $18.72 before dropping to $3.14. In a desperate attempt to stabilize the market, Alameda offered to buy Binance’s FTT supply, to no avail. 

At the same time, investors rushed to pull their funds from the exchange, estimated to be roughly $6 billion worth of net withdrawals. In light of the recent Terra LUNA crash and subsequent demise of Celsius and Voyager, investors were taking no risks. 

The next twist in this unfortunate story is that FTX froze all withdrawals on the platform and announced that it was going into a “strategic transaction” with Binance, with Binance set to buy its biggest competitor. The acquisition was rumored to be worth $1.

This all came crashing down several hours later when CZ announced to his Twitter following that after reviewing the books they would no longer be moving forward with this plan. 

Within 24 hours, the broader crypto assets market started to feel the effects. Bitcoin was down 16%, Ethereum down 24% and Solana, widely backed by Sam Bankman-Fried, down 43%. 

On November 10, Sam Bankman-Fried announced that Alameda Research would be “winding down trading” and issued an apology to his Twitter following. FTX was in the process of sourcing funding for liquidity purposes, with the platform estimated to need around $10 billion in order to honor customers' crypto assets withdrawal requests.

What was really going on at FTX?

This story boils down to CZ tweeting that he would sell his FTT in light of allegations, which created mass FUD and subsequently led to the demise of its biggest competitor. How did a company, considered a heavyweight in the financial markets, worth $30 billion a few months prior, and making 8 figures in revenue a day, suddenly become insolvent?

Industry insiders believe that the relationship between FTX and Alameda was a bit more reprehensible than it appeared on the surface. Based on leaked insights into Alameda’s financials, it is speculated that Alameda used a significant portion of its FTT holdings as collateral to borrow funds from FTX (these funds being customer funds).

While illegal, this also poses a high risk that could see the collapse of both platforms, and consumer funds along with them. If this is proven to be true, jail time could ensue. 

In an internal email circulated to the Binance team, CZ stated that this was not part of a greater plan, nor is it a win for Binance as the greater crypto economy will be affected. From investor trust to crypto prices dropping to the hawk-eyed regulators eagerly watching from the sidelines, the demise of FTX is in no one’s favor. 

Ultimately, the same catalyst that saw the fall of Celsius has been observed here, FTX used its own token as collateral. Let this be a warning sign for any future trading platforms, and a prominent note for those working on crypto regulation.

What this means for the regulation of crypto exchanges

Before any regulators could even whisper a word, big platforms like Binance, KuCoin, OKX and more are believed to be in plans to implement Proof of Reserves accountability. This involves an independent audit of funds by a third party, made available to the public.

The Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), three of the biggest financial regulators in the U.S. have begun (or are continuing, in some cases) investigations into FTX. It is believed that the Texas Securities Board started investigating the exchange and CEO in October. 

In the wake of the aftermath, the White House is also calling for stronger crypto oversights and Californian regulators have announced that they are launching an investigation into FTX, asking customers affected by the virtual currency calamity to come forward. 

Insiders are faulting U.S. regulators for not having more clear guidelines in place, saying that their “stringent-yet-unclear” frameworks have driven big exchanges overseas where there is even less of a regulatory landscape and taxes often go unpaid. With the proper legal framework in place, perhaps situations like these could be avoided, and instead of fleeing, people would trust in U.S. regulatory standards. 

Regulators need to find a balance between creating and implementing legal frameworks that both support the innovation and development of the crypto space but at the same time keep avaricious CEOs in line and all centralized operations above board. 

Regulations put in place to hinder money laundering have been successful, with little consequence to the trader. There is no reason why regulations implemented to stop such happenings in the crypto world could not have the same success.

The latest crisis in the cryptocurrency space is likely to push regulators to amplify their work on building legal frameworks for platforms managing digital assets to adhere to, not just in the U.S., but globally. 

What this means for crypto assets and the crypto industry

While Bitcoin, Ethereum, Solana and most other cryptocurrencies are recovering from lows of yesterday, there is a somber feeling in the crypto space knowing that to the week a year ago Bitcoin and Ethereum reached their current all-time highs.

Crypto trading is known to have its risks, and the responsibility to stay within the green lines falls on the individual trader. While many investors embrace the “hodl” approach (hold the investment for long periods of time), it is of the utmost importance to stay in the know about what is happening in the market and to thoroughly, very thoroughly, vet the coin they are looking to invest in. 

Another, perhaps most important, precaution to take is to work only with crypto platforms that are regulated by government-endorsed financial bodies. Just because you are working with decentralized digital currencies doesn’t mean that you should throw caution to the wind and leave your funds unprotected.

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We are delighted to announce the listing and support of Uniswap (UNI) on Tap!

UNI is now supported on the Tap mobile app. You can now Buy, Sell, Trade or hold UNI for any of the other asset supported on the platform without any pair boundaries. Tap is pair agnostic, meaning you can trade any asset for any other asset without having to worries if a "trading pair" is available.

We believe supporting UNI will provide value to our users. We are looking forward to continue supporting new crypto projects with the aim of providing access to financial power and freedom for all.

Launched in 2018 UNI is the native token to the Ethereum-based automated crypto exchange, Uniswap. Currently the biggest contender in the DeFi space, Uniswap has become synonymous with decentralized exchanges and the automated trading of decentralized finance (DeFi) tokens.

Sparked by the DeFi movement, the platform has seen enormous success not only in the DeFi space but in the cryptocurrency industry as a whole providing to UNI a potent store of value and a  strong medium of exchange.

Get to learn more about UNI in our dedicated article here.

Chainlink is renowned for being one of the biggest oracle platforms in the cryptosphere, making it possible for real-world data to communicate with blockchain applications. The platform aims to fix one obstacle that has prevented smart contracts from becoming more widespread in business and various industries. Below we take a deeper look at what Chainlink is and what the platform has to offer. 

What is Chainlink (LINK)? 

Chainlink is a decentralized oracle platform designed to merge the blockchain world with the real world through data integration. The main aim of the platform is to allow smart contracts to capture real-world data, merging the two worlds.

Smart contracts are digital agreements that automatically execute when the agreed-upon conditions are met. Native to the blockchain industry, there is a significant gap between smart contracts capturing blockchain-specific data and external data like the weather, fiat currencies prices, sports scores, etc. 

Bitcoin, for instance, has a very small range of these input capabilities, while Ethereum can handle more due to its smart contract functionality. Chainlink is designed to provide a far greater range of input across the blockchain space through its network of oracles. 

These oracles are data providers that provide a bridge between smart contracts and external data sources. Each oracle is incentivized through a "reputation score" system to provide accurate data and rewarded accordingly with the platform's native token, LINK. 

Who created Chainlink?

In 2014, Sergey Nazarov and Steve Ellis created a platform called SmartContract which allows smart contracts to come to life by connecting them to external data and widely accepted bank payments. This acted as the prelude to what would become Chainlink. 

The initial version of Chainlink first emerged in mid-2017, founded by SmartContract. Three months later, the Chainlink whitepaper was launched by Navarov and Ellis. This was followed by a successful ICO which raised funds equating to $32 million, selling roughly 35% of the max supply of 1 billion LINK, funding the further development of the platform.

How does Chainlink work?

At its core, Chainlink allows smart contracts to access external data. To do this, it provides an off-chain infrastructure that links smart contracts to all kinds of different data providers. This makes it much easier for smart contracts to get the information they need. The smart contract can then use this data in whatever way it needs to.

The first thing to understand is that smart contracts need external data in order to do their jobs. This makes sense, right? Your standard contract clearly specifies what happens when certain conditions are met. So what determines whether (and when) those conditions occur? Usually, it's some external force that a smart contract simply doesn't know about.

That means a blockchain-based smart contract can't filful its purpose without a way to get information from outside of the blockchain. So what do you do? You could have every individual app developer write their own oracles for each and every smart contract... or you can use a decentralized oracle network.

But what is the difference between centralized and decentralized oracles? Chainlink is unique because it can be used to provide an 'outside view' to smart contracts. The platform allows blockchain applications to securely access off-chain resources like traditional APIs, bank payments, and any other resource that are not currently on the blockchain.

Chainlink provides the security that developers need to run smart contracts without worrying about whether their favourite API is having problems. Chainlink also makes it possible for new data sources to be added to any smart contract which needs them.

Chainlink has three main processes in which it facilitates the communication of off-chain data with on-chain smart contracts. This is done through oracle selection, data reporting and result aggregation, as outlined below.

Oracle Selection

In this step, network users create a service-level agreement (SLA) outlining a set of desired data requirements. The platform then connects that SLA with relevant oracles providing that data. Parameters are then set and the user submits the SLA and deposits the required amount of LINK into what is called an Order-Matching contract, which is matched to the best bidding oracles. 

Data Reporting

Oracles then acquire the necessary real-world data outlined in the SLA from external sources, process the information and send it back to the smart contracts operating on the Chainlink network.

Result Aggregation

The results obtained by the data oracles are then tallied in an Aggregation contract, which assesses the validity of the data. It then allocates a score of the sum of all the data received to the user. This "track record" is used to verify an oracle's integrity, keeping a log of its completed requests, amount of LINK staked and average response time. 

Chainlink is also able to connect with oracles outside of its own blockchain network which is able to collect real-world data requested by the contracts. This process is managed by the Chainlink Core and Chainlink Adapter nodes. 

The network uses a Proof-of-Stake (PoS) consensus, relying on a staking protocol to ensure the network's security. 

How does Chainlink benefit me?

Chainlink is a decentralized oracle network that allows smart contracts to connect to external data sources. These can include APIs, internal systems, or other types of external data feeds. Chainlink's goal is to create a platform where developers aren't restricted from having their smart contracts interact with the outside world in any way they see fit.

You can start using Chainlink right away - no new platforms to learn, APIs to configure, or other complex integrations.

What is LINK?

LINK is the native token to the Chainlink network and facilitates the communication of data. Considered to be an essential tool in merging blockchain technology with real-world applications, the token has gained wide popularity in the blockchain industry. Users use LINK to pay the nodes for their retrieving, verifying and the sending of data. These prices are established by the node operator and based on the current market and demand for that data.

The node operators stake LINK in the Chainlink network to prove their commitment and good intentions. Nodes with bigger stakes take priority over nodes with smaller ones when matching them with SLAs.

LINK is an ERC20 token that powers the Chainlink Network. The LINK token serves three primary purposes:

1. A method to pay Chainlink Node operators for the retrieval of data from off-chain data feeds, like web APIs and other inputs
2. Incentivizes the development of oracles that provide data to smart contracts.
3. A method of staking by clients who want access to the oracle network. 

The primary purpose of the LINK token is to secure the network by staking them and faciliatating network operations. The user must stake a certain amount of LINK tokens to run a Chainlink node, which then acts as an oracle. In return, the user is paid for providing this service.

How to buy Chainlink

If you'd like to incorporate LINK in your crypto portfolio you can easily do so by purchasing the token through a cryptocurrency exchange. Always ensure that you make use of a reputable exchange, one that is compliant with the necessary regulations and local financial authorities.

Cryptocurrency whitepapers are detailed documents that outline the project's intentions, products, and infrastructure. While there isn't a rule on what needs to be included, most projects aim to share as much information about how the project aims to succeed in the hopes of building investors' trust, and interest.

Some of the topics typically covered include a summary of the project's team, goals, products, features, and tokenomics. When researching a blockchain or cryptocurrency project, whitepapers are a very good place to start.

What is a whitepaper?

A typical cryptocurrency whitepaper is usually a report or guide that teaches its readers about a certain topic or problem. As an example, developers might make a whitepaper covering their software to inform users about what they are constructing and why.

In the crypto space, a whitepaper is released by a project and assists in outlining the technical guidelines and core features of the project. While many whitepapers focus on specific coins or tokens, they can also be concentrated around various types of projects, like decentralized finance (DeFi) platforms, for example.

Cryptocurrency whitepapers will typically consist of statistics and diagrams outlining the project's core date, as well as the governing structure of the project, the team involved in creating and leading it, and their roadmap (current and future development plans).

What value do crypto project whitepapers serve?

Despite not being worth a monetary value, whitepapers play an important role in the crypto space. While there are no official criteria for creating them, whitepapers are integral to investors, researchers, developers, and industry insiders.

A great place to start for anyone interested in a project is to read through the whitepaper. If you're considering investing, it's best to meticulously read through it again. Whitepapers often provide insights into the project's potential red flags and a means to monitor whether they are sticking to their forecasted timeline.

A number of blockchain projects that have crashed displayed subtle warning signs in their whitepaper, like promising a deliverable without providing any evidence on how it will be executed.

How does one make a cryptocurrency whitepaper?

There are no official rules or outlines that projects need to follow when creating a crypto whitepaper, each blockchain project may determine what is best for that individual situation. As mentioned earlier, these are often the first official documents outlining the project to potential investors, so thorough and informative content depicting the project's structure, goals, and roadmap is best included.

Whitepapers should always be neutral, and avoid persuasive language or making too many promises. This is essentially a "business plan" in the crypto sense released to investors or the public prior to launching.

What info is included whitepaper?

Objectives

Whitepapers are created by founders to provide a comprehensive overview of both the project and the goal. For instance, Bitcoin's whitepaper describes the project's core objective as "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

While Ethereum's whitepaper describes its intention as "The intent of Ethereum is to create an alternative protocol for building decentralized applications."

In a good cryptocurrency whitepaper, the project will outline what specific problem it aims to solve, and how it will improve various aspects of people's lives. Be cautious of projects that promise the world but have little in the way of evidence to back these claims. In the ICO boom of 2017, thousands of projects overpromised and underdelivered (if they delivered at all).

Blockchain specifications

Whitepapers will typically include how the cryptocurrency will work and function in the greater crypto ecosystem. This might outline technical aspects like the consensus mechanism the blockchain will utilize and how the decentralized aspect of the network will function.

Tokenomics

Another core piece of information that should be included in a project's whitepaper is the tokenomics. This will include information on the token, how it will be allocated, whether it will participate in token burns, or any incentive mechanisms.

Roadmaps

Roadmaps (a project timeline) are not just useful to see how a project aims to deliver on its objectives, but also provide insights into whether the project can keep up with its promises. While missing a deadline isn't a deal breaker in the crypto space, being open and communicating why is important.

Readability

A well-articulated whitepaper will typically be written in a manner that anyone can understand it. However, its important for the new blockchain project to also include certain technical specifications to provide evidence of the project's competence. Anyone can write a whitepaper, it takes technical know-how to create a blockchain platform.

Tips for reading a cryptocurrency whitepaper

• first and foremost, ALWAYS read a project's whitepaper before investing
• read whitepapers with a pinch of salt, they must be neutral and not over-promise
• Look into the team members and their experience in the crypto and blockchain realm
• a great idea doesn't necessarily mean it will be used or adopted
• look for technical explanations that showcase the project's understanding

Examples of crypto projects’ whitepapers

The Bitcoin whitepaper (2008)

The instigator of the entire cryptocurrency industry, Satoshi Nakamoto, an anonymous individual or group, published the Bitcoin whitepaper in 2008. The paper is called "Bitcoin: A Peer-to-Peer Electronic Cash System."

The whitepaper explains how Bitcoin can be used as a more efficient and decentralized form of money, outside the traditional banking model. It gives technical explanations of how the peer-to-peer Bitcoin network allows users to send digital currency without intermediaries. The whitepaper also outlines how the Bitcoin network is resistant to censorship and double-spending attacks.

The project launched a few months later in January 2009.

The Ethereum whitepaper (2014)

While Bitcoin launched the crypto industry, Ethereum played a pivotal role in the development of the blockchain space. The Ethereum whitepaper was published in 2014 by a young developer named Vitalik Buterin and titled "Ethereum whitepaper: A Next Generation Smart Contract & Decentralized Application Platform."

In the Ethereum whitepaper, Vitalik outlines how the platform's intentions differ from Bitcoin's. The whitepaper outlined how the platform would allow developers to create and launch decentralized applications (now commonly known as dapps) and included technological solutions that backed these goals, such as the Ethereum Virtual Machine and smart contracts.

In conclusion

Crypto whitepapers are not legally regulated, meaning that anyone can write one. Although a cryptocurrency whitepaper should provide readers with an understanding of what the project plans to do and how, it's crucial, if you're interested in a particular project, to consider red flags and risks when reading through the document.

The Lightning Network is a second layer solution that enables Bitcoin users to make fast and cheap transactions without compromising on security. The layer two technology allows users to enjoy the benefits of both the Bitcoin and Lightning Network layers simultaneously. Learn more about the Lightning Network solution below.

The Bitcoin trilemma

In order to compete with other payment channels like Visa, the Bitcoin network must be able to process transactions much faster and at a fraction of the cost. However, this scaling cannot come at the expense of decentralization or security.

The "Bitcoin trilemma" is a term used to outline the conflict between these three principles, scaling, security, and decentralization. 

The aim of Bitcoin Cash, Bitcoin SV, and other forks was to increase the block size in order to make Bitcoin transactions faster and more affordable on-chain.

However, these attempts failed to produce an effective method to transact quickly and inexpensively on-chain while still maintaining Satoshi's design. Hence, the Bitcoin Lightning Network.

The lightning network payment channels solution

Is it possible for the Bitcoin network to have it both ways, to keep its original architecture while also functioning as a fast micropayments network? The answer is yes, and thanks to the advent of Lightning Network transactions, Bitcoin can be used for everyday transactions like paying for a cup of coffee.

This off-chain solution was first conceptualized in 2015 by Joseph Poon and Thaddeus Dryja, and works by removing the burden of micropayments from the Bitcoin blockchain and instead utilizes multiple payment channels, which are controlled via multi-signature (multi-sig) Lightning Network wallets.

Why the lightning network?

How quickly can the Bitcoin network process transactions? Bitcoin is presently capable of processing between 2 and 7 transactions per second.

Visa, the current payment channel that drives your debit and credit card transactions, handles 150 million transactions each day, that's 24,000 transactions per second.

In order to make Bitcoin a competitive service to Visa, the Lightning Network needs to be implemented. This channel ensures that micropayments are instantly and cost-effectively executed, and is able to process thousands to hundreds of thousands of transactions instantly. 

The core concepts of how the Lightning Network works.

So how does the Lightning Network work? This layer 2 solution works on top of the Bitcoin blockchain, allowing thousands of micropayments to be executed at one time. This lowers the costs and increases the transaction speed of the initial transaction. There are three core components of the Lightning Network: the nodes, channels, and invoices. 

Lightning Network Nodes

This software connects with other nodes in order to form a network that connects to the Lightning Network to facilitate the sending and receiving of Bitcoin. 

Lightning Network Channel

Users of the Lightning Network establish payment channels with one another so that they may conduct transactions off-chain, which can then be settled (closed) on the mainchain (on-chain).

Invoices

Invoices are QR codes that represent requests for Lightning Network payments on the Lightning Network. Invoices include all of the data necessary to complete a payment on the network, such as the payment amount, which blockchain the invoice is associated with, expiration date, payee public key, routing hints, and other information.

How to use the lightning network

If you would like to make use of the Bitcoin Lightning Network, you will need to open a compatible Lightning Network wallet. Once you have downloaded and signed up for the wallet, you will need to send funds. Simply locate the wallet address of the Lightning Network-enabled wallet and send the funds via your normal payment channel. Once the funds appear in your wallet, you can then send transactions via the Lightning Network to other enabled wallets.

Decentralized Finance (DeFi) enables you to access a variety of financial services, from the basic sort that your regular bank would offer to the complicated instruments used by Hedge Funds and Investment Bankers, only with cryptocurrencies instead of traditional fiat currencies.

Staking your cryptocurrency in smart contracts, essentially locking your funds in an account indefinitely, allows you to earn interest known as an Annual Percentage Yield (APY), a term borrowed from traditional finance (tradfi).

As a thank you for staking funds and providing liquidity, each Defi project offers a token that has value only in the context of that project. That token allows you voting rights on the DeFi protocols' direction and has speculative value.

In just two years, DEFI tokens have shown significant increases in value. Likely the reason why you're here to learn how to gain from these increases. Let's dive in.

Before we get started, let us first address several terms you are likely to come across in this piece:

• Financial institutions are your traditional banks
• Centralized exchanges are crypto exchanges that are operated by a managing company
• Decentralized exchanges are crypto exchanges that are not managed by one company and typically work in a peer-to-peer manner.
• DeFi is decentralized finance and refers to the industry in which regular users can engage various financial services requiring only an internet connection.

How smart contracts work in the DeFi space

A smart contract is a digital agreement that automatically executes once the predetermined criteria have been met. These computer codes are facilitated by blockchain technology and rely on the blockchain that they are built on. 

At the moment, your bank account from financial institutions might give you the right to a certain amount of monthly interest at a fixed rate. The deal is reached through a formal application procedure - which can take many days - that is handled by a mix of people and software and is acknowledged in writing. Once successful, the bank account is opened and you have access to the services.

A smart contract, on the other hand, uses a programming language (e.g. Solidity on Ethereum) to map out the mathematical aspects of an agreement - how much interest is due when and where it should be paid - while the underlying Ethereum blockchain executes the contract for a fee, making it transparent and unchangeable.

In this basic regard, Defi protocols restore the type of savings and investment possibilities that were formerly available only to traditional finance (tradfi), with the crucial distinction that it eliminates the middleman entirely.

Unlike in tradfi, with DeFi projects users interact with code and can avoid dealing with people and lengthy application processes entirely. DeFi allows users to tap into these wealth-generating opportunities in a democratized and inclusive manner.

On the downside, this means that there is no guardrail, so users must be comfortable with the degree of autonomy and trust in the execution of the smart contracts.

The ups and downs of the DeFi ecosystem

Defi projects typically offer significantly greater returns than those provided by tradfi APYs, which tend to be positioned around zero (some banks still offer negative interest on savings). Decentralized Finance on the other hand offer single to double-digit returns, a huge attraction for those looking to increase their capital.

Additionally to the higher returns, DeFi tokens have also seen a rise in value, with some entering the top 20 and top 10 biggest cryptocurrencies based on market cap.

There is, of course, a trade-off when it comes to the seemingly endless benefits of DeFi. Although Defi standards have several interesting and unexplored possibilities, they come with their own set of risks that you need to be aware of:

• Smart contract costs: smart contracts require fees in order to execute, which in times of network congestion, can be exorbitant. Look for Ethereum alternatives to reduce these costs.
• Smart contract vulnerabilities: not all smart contracts are created equal, and should your DeFi protocol not take the correct measurements or make an error in the digital agreement, your funds could become compromised.
• Users are entirely in control: created in the same decentralized nature of cryptocurrencies, there is no fallback should you lose your private key or make an incorrect transaction.

Ensure you vet various DeFi protocols before engaging

In general, more established Defi protocols with a higher total value of assets secured within them (also referred to as Total Value Locked, TVL) are safer. This is due to the fact that their code has been more thoroughly audited and "battle-tested".

Newer platforms will typically offer higher APYs in order to entice investors and build up liquidity. While this may sound lucrative, always ensure that you've done your research in order to understand exactly how the protocol operates and who is behind the project. 

Here are a few things to look out for:

• Has the protocol's code been professionally audited? 
• How long has the project been live?
• What is the platform's TLV? (The higher the better)

Finding your top Defi protocol

There are a number of "well-established" DeFi platforms that have proven reliable and trustworthy in recent years. While the risks are still prevalent, these are the top options when looking to enter the DeFi space with the leading DeFi protocols.

Aave

Compound

Maker

Yearn Finance

How to use DeFi protocols (Get started in DeFi)

In order to engage with DeFi protocols and join the other liquidity providers, you will need a web wallet such as MetaMask. You will need to transfer funds from a centralized exchange, for example, you can use your Tap account to easily transfer ETH or other supported crypto assets directly to your MetaMask wallet, from where you can connect this wallet to the DeFi platform of your choosing. You will not be able to use funds from a traditional financial institution.

Once connected, you can then deposit funds into a lending protocol on any DeFi application and pay the incurring network fee. Any subsequent activities such as staking, unstaking, withdrawing your yield, will likely also cost a fee relevant to the cryptocurrency network you are using.

Understanding the risks associated with DeFi

While we've stressed that using tried and tested DeFi platforms provide a higher level of security, there are still risks associated with the DeFi space.

Below are some more steps you can do in order to secure your cryptocurrency assets and decrease the chance of losing your funds.

• Consider insurance
• Research the team behind the project
• Choose simple yield generation strategies
• Don’t invest more than you can afford to lose

Decentralized finance is one of the most innovative and promising areas in cryptocurrency. It is also a harsh environment, however, that demands some expertise before stepping in.

Before you place any funds into Defi protocols and become one of the many liquidity providers, ensure that you've fully vetted the project and considered the pros and cons of what it has to offer. Also ensure that you understand how the platform operates, i.e. if it says it offers 20% APY, seek to find out how they do so.

The DeFi space can be both lucrative and devastating, so make sure you know what you're doing and good luck out there.

Disclaimer: This article is intended for communication purposes only, you should not consider any such information, opinions, or other material as financial advice.