DeFi explained: what is MetaMask?

Crypto
January 29, 2020

If you’re familiar with decentralised finance (DeFi), you probably know what MetaMask is. But if you don’t, it’s good to know that it is one of the most successful applications in bringing Ethereum and so-called ‘Web3’ closer to mainstream adoption. 

MetaMask is used by over 250,000 monthly active users, processing around 1.5m transactions within the same period. Rather than being used as an everyday hot wallet to make payments with or trade from, MetaMask is mostly used to interact with decentralised apps (dApps) and smart contracts in regular browsers. 

So what is MetaMask exactly?

MetaMask is an Ethereum wallet and a browser extension that can be used on Chrome, Firefox, and Brave browsers. It basically works as a bridge between the Ethereum blockchain and regular browsers and serves as an interface for Ethereum-based dApps.

With MetaMask, you can send, store and receive cryptocurrency, but also participate in Ethereum-based programmes and interact with websites running dApps and smart contracts.

How do I set up my MetaMask?

To run it, all you need to do is download the extension, generate a wallet, safeguard your seed phrase, fund your wallet with ETH, and then it’s ready for use.

What makes MetaMask great is that it makes it so much easier to participate in Ethereum’s decentralised community. Unlike with Bitcoin, on Ethereum users can build their own dApps, write smart contracts, and create new coins.

Ethereum (ETH) is the blockchain’s native currency, but on top of it, there are many other tokens with a value of their own that follow the ERC20 standard (that simply means they are compatible with the Ethereum blockchain). MetaMask can be used to store and use any of these tokens across different dApp environments.

Can I trust MetaMask?

  • MetaMask is open source, which means the underlying code is free to access and assess, and improve. 
  • It’s also interesting to note that MetaMask is directly linked with a number of exchanges, enabling users to purchase ETH or ERC20-based tokens straight from their wallet. 
  • Although it may sound complex, MetaMask has a simple interface, making it easy to use. 
  • Unlike many other wallet providers who store keys on their own servers, MetaMask stores keys on the user’s own browser, giving the user more control over their funds. 

It should be noted, however, that there are some considerations you should make before using MetaMask. First, while MetaMask does not have access to your information, browsers generally do collect information - not so much your private keys, but rather online behaviour.

Another thing to be aware of is that despite the brilliance of this application, it is still a hot wallet and that comes with some risks. Unlike cold wallets, which are offline, hot wallets can be hacked. This shouldn’t stop us from using them, but we generally advise to keep the majority of your funds in a cold wallet, and only a portion to actively trade with or use in payment ecosystems.

How can MetaMask be used?

MetaMask can be used with most of the apps available in the DeFi world across lending, borrowing, prediction markets, savings, payments and full on DeFi dashboards like Zerion. Here are some examples of the types of dApps MetaMask is compatible with:

Aave

A non custodial money managing platform where users can create their own decentralised CDP. This means that traders can lend and borrow for things like freeing up capital without having to sell holdings to take advantage of an arbitrage opportunity for example. 

Pooltogether

If you’ve ever wanted to play the lottery but didn’t want to lose, then Pooltogether has the answer. It’s a no-loss lottery meaning that you either win or not, but you don’t lose funds just for playing. It is a revolutionary idea. All players pool their money together and the prize money is generated by the interest accrued in total. The winner takes the savings home, and the rest takes their initial deposit home.

Landemic

Landemic is a relatively new dApp, where users can claim virtual tiles of land laid over a real-world map - they can purchase and sell these plots. The idea is to leverage blockchain technology to support the investing and trading of both virtual and real-world estate assets.

LegalContracts

This is a simple app where two people can negotiate and sign a legal contract on the Ethereum network without the need for third-party mediation. Once the contract has been signed by both parties, it cannot be altered and will forever exist on the Ethereum blockchain.

Eth2

Eth2 offers a solution that allows users to send Ether to anyone through a phone number. After clicking a link from a confirmation text message, the receiver will be automatically guided through a series of simple steps to collect transferred funds.

MetaMask is part of the great rise of DeFi, which we believe is an important step that will push the crypto industry further towards mass adoption.

How do I fund my MetaMask wallet?

To get started with DeFi apps using MetaMask, you’re going to need money in your wallet. Here are 2 quick ways to fund your MetaMask wallet:

Sending crypto to your Metamask wallet

If you already have ETH in another wallet, you can simply send it to your MetaMask wallet address. Depending on the transaction speed you choose, this can be transferred in seconds, minutes or hours. 

You can send any ERC20 token to your MetaMask wallet. If you have Bitcoin and want to use it in DeFi through MetaMask, you first need to exchange BTC for ETH or another ERC20 token like Dai for example. 

Buy Ethereum with cash

Through our network of Cash Points, you can buy Ethereum with cash using your mobile phone. Cash Points are locations created by other Bitspark users where anyone can exchange between cash and crypto at much better rates than any ATM could offer.

Once you have ETH in your Bitspark wallet, you can deposit and withdraw that to and from your MetaMask wallet. This also means that say you win the next pool on PoolTogether and you want to cash it out, you can do so using Bitspark Cash Points near you.

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