In the rapidly evolving world of Decentralized Finance (DeFi) on Ethereum, challenges like high gas fees and slow transaction speeds are common. This is where Layer 2 solutions (L2s) like Linea come in, offering faster and more cost-effective alternatives while maintaining the security and decentralization of Ethereum.
To engage in DeFi, you first need digital assets on a blockchain. On-ramps facilitate the conversion of fiat currency to digital assets on the blockchain. For example, converting USD in your bank account to USDC tokens on Ethereum.
Bridging is essential for moving digital assets between blockchain networks, like from Ethereum to Linea. It involves removing the asset from one chain and adding it to another. Understanding this process is crucial for using DeFi on L2s.
The bridging process entails depositing digital assets into a smart contract on an L1, confirmation of this deposit by the L2, and then transacting on the L2 network. Withdrawing assets involves a similar process in reverse.
Risks in using bridging and on-ramp services include smart contract bugs and centralization risks. To mitigate these risks, it’s advised to use trusted platforms, diversify investments and platforms, and stay educated on developments in the crypto world.
Bridging and on-ramps are crucial steps in entering DeFi, but they come with their challenges and risks. Understanding these processes is vital for safely navigating the DeFi landscape. Linea offers the DeFi Voyage program for a more in-depth exploration of these concepts in an educational setting.
Source: Mirror
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.