The Basics of Web3 Trading: Ultimate Guide for Beginners
Want to know how to handle trading on DeFi platforms like Uniswap, Pancakeswap, or Dextools? This guide will introduce you to the basics of Web3 trading and help you make informed decisions when trading crypto assets on decentralized platforms. Learn how to set up your Web 3.0 wallet, fund it with crypto, and navigate the exciting world of DeFi.
Web3.0 or Web3 trading has emerged as a revolutionary force in the financial landscape. Additionally, it gives access to a world of decentralized applications (DApps) and peer-to-peer transactions. While the concept may seem intimidating at first, understanding the fundamentals of Web3 trading is surprisingly straightforward.
By continuing to read this guide, you’ll learn the fundamentals of DeFi trading:
- The Basics of Web3 Trading
- Web3 wallets and how to connect to DeFi platforms
- Set up proper risk management
What Does Web 3.0 Mean?
Web 3.0, often referred to as the decentralized web, is the next evolution of the internet. Consequently, by aiming to shift control from large corporations to individual users. It’s built on blockchain technology, the same technology that powers cryptocurrencies like Bitcoin. Additionally, it enables a more secure, transparent, and user-centric online experience.
Web 3.0 is seen as the next big thing in crypto because it promises to address the limitations of current internet platforms. For instance, their centralized control, data privacy issues, and lack of user empowerment. With Web 3.0, users can own their data, participate in governance, and interact with applications more securely and directly. This has the potential to revolutionize various industries, from finance and social media to the arts and gaming.
Web3 trading vs Bitcoin trading
When it comes to crypto trading, traders have two main options: traditional cryptocurrency exchanges, like Coinbase or Binance, and decentralized finance (DeFi) platforms. While both options allow traders to buy, sell, and hold crypto assets, there are some key differences between the two.
Bitcoin trading primarily involves transactions on centralized exchanges, where traders need to create an account to use the platform. These exchanges offer a user-friendly interface and often provide various trading tools and features. However, centralized exchanges also hold custody of traders’ assets, which introduces an element of trust and counterparty risk.
Web 3.0 trading, on the other hand, involves interacting directly with DeFi platforms, which operate on a decentralized blockchain network. These platforms do not hold custody of traders’ assets, and you don’t need an account to sign up. However, Web3 trading often requires a deeper understanding of blockchain technology and smart contracts, and it may involve higher transaction fees compared to centralized exchanges.
In summary, Bitcoin spot trading offers a more traditional and user-friendly experience. On the contrary, Web3 trading provides greater control over assets and aligns with the decentralized ethos of the blockchain ecosystem. The choice between the two ultimately depends on your preferences, risk tolerance, and technical expertise.
Setting Up Your Web3 Wallet
The first step into Web3 trading is setting up a Web3 wallet. A Web3 wallet serves as your digital gateway to the decentralized world, allowing you to store and manage your crypto assets. Popular Web3 wallets include MetaMask, Phantom(Solana), and Trust Wallet. These wallets are easy to install and use, and they provide a secure environment for your crypto holdings.
Practical Example: How To Setup Trust Wallet
First of all, Trust Wallet is a beginner-friendly solution for those who want to know more about DeFi, NFTs, and storing coins in general. Especially, the idea of having control over a wide array of tokens in the palm of your hand makes it very appealing.
Next, all the necessary steps to install this wallet:
- Go to the Trust Wallet homepage.
- Click the icon to download the app for your device.
- Open the app.
- Tap Create a new wallet.
- Check the box and tap Continue to accept the Terms of Usage.
- Take note of your recovery phrase.
- It’s important to keep this safe because anyone can use it to access your wallet.
- It’s not possible to take a screenshot of this screen.
7. Tap Continue.
8. Re-enter the recovery phrase to verify it.
9. Tap Continue.
At this point, you are all set and can start using the Trust Wallet.
❗ TIP — A good option for securing your recovery phrase is to use a stainless steel crypto wallet that can survive about anything, from fire to acids, and lasts more than 20 years.
Funding Your Wallet with Crypto
Once you’ve established your Web3 wallet, you’ll need to fund it with crypto to engage in trading. There are several ways to acquire crypto, including purchasing it directly from exchanges like Coinbase or Binance. Alternatively, you can earn crypto through faucets or use web3 apps to earn crypto.
Navigating DeFi Platforms
DeFi (Decentralized Finance) platforms are the cornerstone of Web3 trading. These platforms provide a decentralized alternative to traditional financial services, enabling users to trade, borrow, and lend crypto assets without the need for intermediaries. Popular DeFi platforms include Uniswap, Curve Finance, and Pancakeswap.
How To Connect to Pancakeswap
For instance, you have downloaded and installed Trust Wallet, deposited some ETH tokens, and are ready to move forward. What are the next steps to start trading on a Web3 platform like Pancakeswap?
- Open your Trust Wallet App and make sure you have some funds
- Below is the menu bar & tap the Browser(square) option
- In the upper search bar type ‘Pancakeswap‘
- Click on the first search result
- Connect your wallet with PancakeSwap
- Open your Trust Wallet App and make sure you have some funds
- Below is the menu bar & tap the Browser(square) option
- In the upper search bar type ‘Pancakeswap‘
- Click on the first search result
- Connect your wallet with PancakeSwap
At this point, you are ready to start using PancakeSwap with Trust Wallet. Also, notice that the default blockchain it connects to is Ethereum.
Risk Management in Web3 Trading
As with any form of trading, risk management is crucial in trading with Web3 wallets like Trust Wallet. Four primary risks to be aware of include:
- Market Risk: Crypto prices can be unpredictable, and this might cause the value of your assets to go up and down, leading to potential losses.
- Liquidity Risk: Some apps and platforms(Dapps) in the crypto world might not have enough people buying and selling, making it tricky to trade at the prices you want.
- Counterparty Risk: When you use smart contracts or trade directly with others, it’s important to check if the people you’re dealing with can be trusted.
- Technology Risk: Since Web3 is still new, there could be technical issues or problems that might affect traders and their assets. It’s like being cautious about potential hiccups in the technology.
Additional Tips for Web3 Beginners
As a beginner venturing into Web3 trading, consider these additional tips:
- Start small: Begin with small investments to gain experience and minimize potential losses.
- Conduct thorough research: Before trading any crypto asset, thoroughly research its fundamentals, tokenomics, and project roadmap.
- Diversify your portfolio: Spread your investments across various crypto assets to reduce overall risk.
- Utilize risk management tools: Employ stop-loss orders and other risk management tools to safeguard your investments.
- Stay informed: Keep up with the latest developments in the Web3 space to make informed trading decisions.
Conclusion: The Basics of Web3 Trading
In conclusion, navigating the world of Web3 trading is an exciting journey into the decentralized frontier of finance. We’ve covered the basics, from understanding Web 3.0 and its transformative potential to choosing between traditional and decentralized exchanges.
Additionally, setting up a Web3 wallet, funding it, and exploring DeFi platforms like Uniswap are crucial steps we’ve demystified. Remember, with great potential comes responsibility — manage risks wisely.
Whether you’re starting with Trust Wallet or venturing into Pancakeswap, begin small, diversify, and stay informed. Web3 trading empowers you, putting control back in your hands.
As Web 3.0 trading is the next big thing in crypto, it is crucial to have the proper knowledge to give you a headstart in becoming profitable. Happy trading!
