Ethereum and DeFi

Ethereum is the network almost all of DeFi runs on. To use it well you need three things: an understanding of gas fees and why they spike, a way to avoid most of those fees using Layer 2 networks, and the mechanics of the main protocols you will actually interact with, mainly Uniswap and Curve.

This hub walks through all of that in order. The practical takeaway most beginners miss: you rarely need to transact on Ethereum mainnet. Bridging to a Layer 2 like Arbitrum cuts a 50 dollar transaction to under 10 cents while keeping the same protocols and most of the same security. Start with gas fees, then bridging, then the protocol guides.

Start here

How Ethereum works

Layer 2 and lower fees

Using the main protocols

Key concepts before you deposit

Ethereum and DeFi FAQ

Why are Ethereum gas fees so high?

Every transaction competes for limited space in each block, and you bid a fee to get included. When demand spikes, so does the fee. The fix for most users is not to wait for a quiet moment but to move to a Layer 2 network where the same transaction costs a fraction of a cent. Full explanation in Ethereum Gas Fees Explained.

What is a Layer 2 and is it safe?

A Layer 2 is a separate network that processes transactions cheaply and posts the results back to Ethereum for final security. Arbitrum, Base and Optimism are the main ones. For everyday amounts the security is close enough to mainnet that the fee saving is worth it. Very large positions are the case where mainnet still makes sense.

Which network should a beginner use?

Arbitrum or Base. Fees are low, the major protocols are all deployed there, and bridging in is straightforward. Ethereum mainnet is for large transactions where a 20 dollar fee is a rounding error. See Ethereum vs Polygon vs Arbitrum.

Do I need ETH to use DeFi?

Yes, a small amount, because gas fees on Ethereum and its Layer 2s are paid in ETH. Even if you only want to hold stablecoins, keep a few dollars of ETH on the network you use to cover transaction fees.

Keep exploring

Related hubs: DeFi Passive Income, Wallets and Security, Crypto Basics. Back to the homepage.