DeFiChain Basics Tutorial

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Revision as of 03:45, 9 March 2022 by Misterpiggie49 (talk | contribs) (Added/updated/revised information)

This is a work in progress. Please do not go off of this tutorial as it is incomplete, unedited, and may not be accurate.

This tutorial is designed with easy-to-understand language without complex words or cryptocurrency jargon, for a new cryptocurrency user who has already done their research and would like to invest in DeFiChain.

A Short Introduction

DeFiChain has been designed specifically for decentralized finance, and it has its own blockchain. To make our blockchain stronger, it is connected, in a way, to the Bitcoin blockchain for extra security and safety, as Bitcoin has the oldest and arguably the most secure existing blockchain.

( -- verify below please -- )

The main coin of DeFiChain is DFI,

DFI is the native coin of the blockchain. A native coin is basically the currency of the blockchain. To make some examples, ETH is Ethereum's native coin, and BTC is Bitcoin's native coin. An example of a non-native coin (which is called a token) is SHIB on the Ethereum blockchain. Just to clarify, SHIB is a token. Anything that is not native to a blockchain is a token. All transactions on the blockchain are powered by native coins. So, you must have DFI for transaction fees on DeFiChain, you will often need it for swapping between coins, and more. It can be compared to the euro in the E.U., peso in Mexico, or U.S. dollar in the U.S., you must have it to interact with people and entities.

Here on DeFiChain, we also have non-native coins. We have decentralized tokens (non-native coins) that represent real stocks, 150% backed by people providing collateral, and tokens that represent real crypto and are 100% backed by the real asset. These tokens are like sending around assets in the real world. In the U.S. you pay dollars as fees for sending things around like real estate, stocks, etc, and that is how it is like in DeFiChain. The goal of our community is to make a world of decentralized finance, where everyone can interact with each other without having middlemen such as companies and organizations.

There will be more information about the non-native tokens on DeFiChain in the section titled "The DeFiChain Ecosystem."

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After reading this article, you probably will have more questions. Here are the official groups/social media of DeFiChain. For extra security, check the official website. Please note: Scammers are attempting to steal your money and personal information. If you receive a sudden direct message, you do not need to respond and simply ignore them/block them. Community mods/admins/support will never start the conversation. If you are unsure if someone is attempting to scam you, chat in the official groups. Remember: There is only one legitimate group in every language. If you are already in the DeFiChain English group, there is no other DeFiChain English group.

How to Obtain DFI

To obtain DFI, there are two main methods.

Here we will describe the advantages and disadvantages of each method.

CakeDeFi

Background

Cake was founded in early 2019 by Dr. Julian Hosp and U-Zyn Chua. They also started the DeFiChain project. Their goal is helping make investing easier. (verify)

They do also have their own subreddit and Telegram group. These cannot provide official support, do not let anyone lead you to believe so. It will be made clear in their respective groups.

Advantages

  • Founded by same crypto investors as the project itself, so they have a great understanding of the project
  • Largest company involved with DeFiChain
  • Hundreds of thousands of users also use the platform (400,000 according to the website, as of March 2021, cakedefi.com)
  • Offers other services on DeFiChain and supports other coins, allowing you to use it for multiple purposes
  • They are offering a $30 deposit bonus on any first deposit of more than $50, incentivizing users to start with them

Disadvantages

  • 4% premium, according to the official DeFiChain website (defichain.com)
  • KYC is required (you need to provide proof of residence and other personal information)
  • Certain locations are prohibited from using Cake, you must ensure you are in an authorized location
  • Fees may be higher than using the blockchain, and withdrawals will take longer than using the blockchain

Registration (more information needed)

The official registration form is at https://app.cakedefi.com/register. Referral codes may enable you to get a larger bonus.

Exchanges

Background

You may have heard of exchanges such as Binance and Coinbase. These are two of the largest centralized exchanges in the world. However, these exchanges do not currently support DFI. If you wish to trade DFI using this method, here are a couple conventional options:

  • KuCoin (large exchange)
    • The registration link is here. Once again, referral codes may give you certain bonuses, so take advantage of them.
    • Advantages
      • Fees are 0.2% and decrease if you trade significantly more. You also get a 20% deduction if you pay with their native token KCS. Find more information here.
      • DFI staking is offered, although with much higher fees than Cake.
      • Offers a large variety of cryptocurrencies, allowing you to trade other coins and tokens as well.
      • No KYC is required
    • Disadvantages
      • Failure to complete KYC results in a lower daily withdrawal limit. Unfortunately, it is not possible for U.S. users to complete KYC and become verified as KuCoin is not licensed to operate in the U.S. Therefore, your funds are at a greater risk should the government crack down on such exchanges.
  • Bittrex (small exchange)
    • Bittrex's registration link is here. They do have referral codes, which may give various bonuses and discounts.
    • Advantages
      • Like KuCoin, there is a large selection of cryptocurrencies available for purchase
    • Disadvantages
      • Fees are higher than at KuCoin, starting at 0.35%

In addition to these traditional exchanges, you may also use DFX.Swiss to obtain your DFI if you have a SEPA bank account. It is a community-run business and also offers other services such as staking and trading of the tokens on DeFiChain. This will be explained more in detail in the sections below. However, their services are available only on their app, and their fees are significantly higher. They begin at 2.9% for low-volume traders and decrease to 2.4%, although there is a 1% discount if you use a referral code.

Advantages

  • May be easier to use and have proven track records for exchanging all types of coins
  • Lower fees than Cake

Disadvantages

  • Exchanges are not as familiar and do not specialize in DFI

There are other methods of obtaining DFI, as this list is not all-inclusive, but they are not important and not of benefit for you to understand at the moment, and many users do not use alternative methods anyways. The two methods above are the most common ways of obtaining DFI.

This concludes the section, you should now have a better understanding of how to get DFI.

The DeFiChain Ecosystem

The DeFiChain Ecosystem is basically the economy or system of DeFiChain. Just like a country has an economy, blockchains have ecosystems.

Unlike Bitcoin's blockchain, which only has the native coin BTC, DeFiChain has its native coin DFI as well as tokens.

Tokens

There are really two types of tokens on DeFiChain. One type can be made by anybody, you only have to pay a fee to make them, but the fee is returned when returning the tokens. These are not really significant, and you do not need to pay much attention to them. But when you see a wallet with random tokens, they are most likely part of this type.

The other type of tokens are known commonly as dTokens. You will often see tokens labeled as dBTC, dETH, or even dSPY, and dQQQ. These tokens are introduced by the DeFiChain developers, but it is very important to note: the developers cannot make these tokens freely! They must be backed up before they can be made. You may be wondering, why do the tokens have a "d" in front of their name? The reason they have a "d" in front of their name is because they are not the real coin. dBTC cannot be sent and sold to Binance, and dSPY cannot be sent to Robinhood to get U.S. dollars. They are tokens that exist only on the DeFiChain network so that investors can invest in crypto and in stocks and ETFs and keep everything in their wallet on DeFiChain.

With this concept, you can make a portfolio that is almost completely decentralized. No exchange or platform holds your stocks and crypto, but can be put in a cold wallet for security. You could buy some dSPY, dAMZN for stock exposure and dVNQ for real estate exposure, then buy some dTLT and dGLD for bonds and gold exposure, then add dBTC and dETH so you can diversify your crypto holdings, leave cash in DUSD, the DeFiChain stablecoin, and then have some DFI, which has a maximum supply of 1.2 billion.

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Traditional Brokerage (example: Fidelity) Fintech (example: Robinhood) CEX (example: Binance) DEX (example: Uniswap) DeFiChain
Decentralized
Security and Reliability

Been around for decades

Has less of a track record

Often criticized for hacks, seen as sketchy

✅ Although less of a track record, anchored to Bitcoin and assets are backed up by at least 100% of their value
Trade derivatives

In progress, not yet available

Trade stocks
Trade bonds and commodities

Usually available

May be available

Available, but with a smaller selection

Trade big cryptocoins (BTC, ETH) Depends
Trade smaller altcoins ✅ Highly Limited (25 or less) ✅ Moderately Limited (100-200 or less) ✅ Highly Limited (only a couple, but it is being worked on)
Potential to use assets for extra cashflow and/or rewards

Limited selection due to regulation

Common Topics of Confusion

There are many ideas, concepts, and topics that may be confusing to beginners and average users. Here we will go through a majority of them, and remember, feel free to ask more questions in the official social media groups that were listed at the beginning of the article.

UTXO (more information needed) (verify)

DeFiChain uses the unspent transaction (tx) output model, or UTXO. There are two types of DFI, UTXO and token. UTXO DFI can be spent (sent to another wallet) through the blockchain; it is your available balance. The other form of DFI, token DFI, is received in liquidity mining. Because in every block, which occurs approximately every 30 seconds, rewards are distributed to liquidity providers, creating tons of UTXO transactions would be inefficient, spamming the blockchain with transactions, and raising the cost of a transaction that would make it unprofitable to liquidity mine. So, rewards are instead distributed by token, which does not include a transaction fee. Token DFI must be converted to UTXO DFI before it is possible to send any DFI.