The DeFi Experience in Ledger Live

By Kirsty Moreland

If you’re busy exploring the world of DeFi, and want to make sure you stay safe, look no further than Ledger’s DeFi integrations. Here, we give you a guided tour.

TradFi faces a range of challenges that make it obsolete for today’s expectations. Lack of accessibility, time-consuming and cost-heavy services are just the beginning. TradFi means the end user is struggling with absolute absence of control over one’s own money, which almost defeats its purpose.

Think about it: Do you actually own the money you see in your bank account?

You might think you do, but actually you don’t. Your funds in your account are actually digital numbers recorded on the ledger of a central entity that actually retains the ultimate control over the assets. Yes—in fact, the bank retains the ultimate control of your assets.

Why Do We Need DeFi?

Put simply, freedom and ownership are almost non-existent parts of TradFi. Its failure to reach billions of adults worldwide and its favor-the-rich mechanisms make matters worse. And that’s exactly where DeFi fits in. The foundations of decentralized finance (DeFi) were laid with the launch of Bitcoin in 2009. It did a remarkable job by offering people a way to store and transact money without any central entity.

That, however, was only the disruption of one part of the existing financial system – the transfer of value. The launch of Ethereum is what set things in motion for the wider aspect of DeFi. It enabled developers to build all kinds of financial services you can think of and more; on a decentralized network.

Today, we have a range of blockchains that support a massive proportion of the financial services on blockchains that we usually only saw in TradFi. You want a loan without a bank or lend your money? Go to Aave or Compound. You want to trade your assets without giving up control of your funds? Use a decentralized exchange like Uniswap. Margin trading, insurance, stable asset storage? Everything’s there. And unsurprisingly, everything works without a central entity.

That being said, DeFi comes with its own concerns – let’s have a look at those right now.

The Risks of DeFi

DeFi is an inspiring, fast-moving ecosystem that is constantly being driven forward by developers. These developers work by their own accord to improve systems with their technical know-how. But regular end users like you and I probably aren’t coding experts, and we can’t read complicated smart contract details when it’s given to us in raw form.

That lack of understanding and transparency into transaction details is precisely what has opened new doors for hackers to exploit users. And of course, the ever-present question of private key storage looms large when we transact with DeFi platforms.

So let’s take a deeper look at the key vulnerabilities you face as you explore the industry, before giving you a guided tour of Ledger’s solutions.

Your Private Keys Aren’t Always Safe

Your funds are only as safe as your private keys. Thus having a secure place to hide your private key is paramount. Unfortunately, not all crypto wallets protect your private key in the same way. And some methods are safer than others.

For example, Hot wallets are great for interacting with DeFi protocols and other blockchain platforms. They offer a convenient way to transac, but the downside is that these wallets store your private keys on your host device, like your phone or laptop. Since those devices often connect to the internet, using a hot wallet could leave you vulnerable to hacks and malware that target your private keys.

Hardware wallets effectively address this issue by storing them offline at all times. But there’s a trade-off too: while bespoke hot wallets are designed to interact seamlessly with dApps and DeFi, their hardware counterparts are not always able to work with your favorite platforms so seamlessly. DeFi protocols are developing at a pace, and security infrastructure hasn’t always kept up.

So, to use your hardware wallet funds on a DeFi protocol, you need to connect it with a middleware that is compatible with the protocol. However, that brings up the next biggest DeFi risk: Blind signing.

You Can’t Read What You Sign

When you conduct transactions on a DeFi platform, its smart contract sends a request to your wallet. You must verify this request and confirm it from within your wallet interface to complete the transaction.

The problem is, the request you receive in your wallet is coded as a string of numbers that are hard to decipher. This is because the wallet you’re using cannot read or decode the smart contract details, making it impossible to know for sure what you’re agreeing to. Is it permission for the transaction we requested, or is it to drain the funds from the wallet? We can’t know, so we simply trust the platform we’re using and sign the transaction blindly; a practice called bling signing.

As users become more educated and smart contracts become harder to hack, hackers are relying on blind signing to trick users to open doors for them. They hide malicious code behind a regular-looking request, which, if you sign, may offer unlimited access of your funds to them. Big mistake!

So as you can see, crypto wallets being used with DeFi platforms must strike a fine balance for users. They must offer not only security, but also ease of use and compatibility with the platform itself.

How Ledger Live Helps You To Mitigate DeFi Risks

So how do you start interacting with DeFi while keeping yourself protected from the risks? Well, it all starts with your humble private key, and how you keep it safe.

Hardware Wallets Keep Private Keys Protected

Ledger is a simple and safe gateway to DeFi services, you to secure the keys for your DeFi wallets within a secure device: a hardware wallet. Then, to allow you to interact with the blockchain without having to worry about blind signing, we Ledger integrated some key DeFi platforms into its ecosystem. Now, you can dive into DeFi directly from the safety of the Ledger Live. It’s like a walled garden for DeFi, where you’re free to explore in full and have certain knowledge that you’re within safe territory.

Avoid Blind Signing

Ledger has successfully replaced the common trend of blind signing by introducing clear signing in its hardware wallets. So, when you conduct a transaction on any DeFi platform integrated into Ledger Live, your hardware wallet screen shows you the exact details of the transactions and what you agree to.

Say you’re making a swap on an integrated exchange platform: when the request arrives on your wallet screen, instead of showing a string of characters, it will show you in human-readable text the exact amount of ETH you’re swapping and the amount of USDT that you will receive. You don’t have to eat computer code for breakfast to understand that.

Talk about flow, security, ease of use, smooth user interface. It’s all there when you use DeFi through Ledger Live. 

Ledger Live Integrations

Over time, Ledger Live has included more and more DeFi services. This gave users a chance to explore the vast amount of DeFi opportunities available without the worry of exposing their keys.These services fit into four main sections: swapping, staking, lending and borrowing. Let;s see what they are all about:

Swapping

If you’re more into Decentralized Exchanges (DEXs) than CEXs for the increased control they offer you over your funds, let’s take it to the extreme. Ledger Live has integrated 1inch and Paraswap — two of the most widely used DEX aggregators. You can go to either of these platforms within Ledger Live and compare the swap rates of assets across hundreds of DEXs and then choose the best rate to make the swap. All while your Ledger device keeps your sensitive wallet information offline. If you want to learn more, check out the full article on how to swap crypto.

Staking

If you don’t already know, make sure you check out the full article on what crypto staking is. But essentially, there are numerous opportunities to let your crypto work for you. Then, you can just sit back and receive the rewards for taking part. Crypto staking is one of the easiest and most effective ways to grow your wealth passively.

Plus, you can stake crypto easily and securely within the Ledger Live interface. Ledger Live has multiple staking partners such as Lido, Kiln, Stader and Compound, each offering different ways to stake. Whether you’re interested in native staking, pooled staking or even liquid staking, Ledger Live has an option for you.

An Extra Special Tool: DeFi Dashboard in Ledger Live

Tracking your DeFi investments can be a challenge when you’re using multiple platforms and own a number of assets. Simplifying that is the DeFi dashboard platform, Zerion, which is now integrated with Ledger Live. Apart from showing you a breakdown of your entire portfolio, it also allows you to perform a range of DeFi activities from within its ecosystem. So, while using Zerion on Ledger Live, you can borrow, swap, add liquidity, or even save your assets to earn interest. 

Ledger Live and DeFi: A Match Made in Heaven

Security and simplicity lie at the core of what we do at Ledger. The integration of DeFi protocols into Ledger Live is a part of bringing those two features to Ledger users. Decentralization is all about giving power and control back to individuals and Ledger provides a platform to keep you secure, no matter what part of decentralized finance you want to start with.

Knowledge is Power.

If you’re just getting into DeFi and you’re wondering how to make the most out of your HODLd coins and tokens, look no further – School of Block has the answers.