Hello there, fellow crypto enthusiasts! I’m on a quest to demystify the complexities of using decentralized finance (DeFi) within the Solana blockchain. If DeFi is a new concept for you, strap in — this post will take you from knowing zilch to becoming a DeFi pro in no time. We will learn how to effectively engage in token swapping and more.

Decentralized Finance Explained

First, let’s get a grip on what DeFi is all about.

Essentially, DeFi is a decentralized platform that empowers you to trade tokens from one to another, requiring nothing more than a connected wallet. An excellent example of this is Jupiter, one of the most popular dApps from 2021.

Formerly, the trading process was overly reliant on centralized exchanges like Binance. Traders would deposit Bitcoins into Binance’s custodial wallet and then exchange them for Ethereum, USDT, Ripple, or Solana, among others. After completion of trades, traders would then withdraw funds to their bank accounts. However, DeFi platforms like Uniswap and Jupiter offer a decentralized and non-custodial alternative to this process.

Here’s an illustration of how Jupiter works:

• Connect your preferred wallet (In our case, we’ll be using Phantom).

– You can always swap any amount of SOL, even 0.01 SOL. In our case, we’ll be swapping 1 SOL within the Phantom wallet and as you can see from the screenshot below, I received $23.08 USDC.

Note: Always have 0.1 SOL in your wallet for gas fees. A transaction on Solana costs less than $0.002.

Now, the juicy part — initiating a token swap.

• Enter the swap tab in your wallet- Review the proposed order and confirm the swap.

There is usually a small fee levied by Phantom for this transaction. Smaller swaps are usually preferable for transactions on Phantom. However, for larger swaps (let’s say over $20), it’s less advantageous, with the small fee going to the liquidity providers that enable the token buy/sell functionality.

If the same swap was done on JUP, I would receive $23.28 for 1 SOL.

Why use Jupiter?

Jupiter is an aggregator, connecting multiple sources on the blockchain to fetch you the best prices. Hence, larger transactions may warrant a platform switch for cost-effective transactions.

Token Swaps: A Deeper Dive

With a hefty wallet, it might be tempting to carry out large trades, for example, 100,000 SOL. Nonetheless, this often results in errors due to liquidity limits on DeFi platforms. In such cases, smaller trades of less than $100,000 multiple times offer an optimal solution. With the Solana blockchain’s speedy transaction processing and low fees, this should be a breeze.

Let’s consider that you want to purchase $NANA token, a token from the Play the Heist game. When performing a transaction, if there’s a large price impact — well above 7.7% — try to make smaller trades. By running these trades multiple times, you’ll get more tokens and keep your losses to price impact at bay.

By clicking the swap button, you can easily switch between tokens.

• Click on Half, Max, or put in a specific amount you wish to swap.- Review the proposed transaction and click swap.- Wait for Phantom to load the transaction prompt – Confirm the transaction by clicking Approve.

After the successful completion of the transaction, you can view your transaction history still on Phantom.

Among other things you might notice on Jupiter are transaction fees and deposits. These will be covered in-depth in the intermediate course posts.

Moving Forward with DeFi on Solana Blockchain

DeFi on Solana blockchain makes swaps and transactions insanely fast and cheap. Jupiter handles everything with such fluid ease that it’s difficult to think of stepping back to traditional methods.

With knowledge of how to make swaps with Jupiter comes the next phase, mastering how to earn yields on your tokens through other DeFi applications. So why wait?

Stay curious, and catch you in the next video. Bye!

“The future of finance is fully decentralized.” — Seb Monty

Disclaimer: This is a helpful blog. Follow me on my socials but remember this is NOT FINANCIAL ADVICE. I am making this content as a community member because it is great to learn crypto, playing on Solana is fun, and it is easy to onboard friends into the space with a game like this.
My opinions are my own, research more if you wish, and if you decide to degen, that is your decision!

Follow me on X: https://x.com/SebMontgomery