Decentralized finance, or DeFi, is one of the prominent sectors in crypto which have rapidly climbed up the stairs of popularity. The growing demand for DeFi solutions is proof of the rising interest of investors in non-custodial financial lending protocols yielding high-interest rates. As the interest in DeFi grows stronger every day, the TVL, or total value locked in DeFi apps, has reached the $55 billion mark.
The massive potential of DeFi showcases adequate reasons to become a DeFi Developer and leverage employment opportunities. You can also learn the skills and knowledge required to become a DeFi Developer. The following discussion will showcase a career roadmap with an outline of the essential skills you need to learn to become a DeFi developer.
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Understanding Important Terms in Decentralized Finance
The first thing you need in a DeFi Developer roadmap is clarity. Aspiring DeFi developers must start their journey with an overview of decentralized finance itself. As the name implies, decentralized finance refers to non-custodial financial products which offer traditional financial services without any intermediaries. The core of DeFi applications is smart contracts, which provide automated code that underlines the operations of DeFi.
In the case of DeFi, centralized institutions like banks and centralized exchanges do not have any authority. DeFi lending protocols and exchanges have become popular applications in the domain of financial services right now. Some of the popular DeFi lending protocols include Aave and Compound, while examples of DeFi crypto exchanges include Uniswap and Curve Finance.
Ethereum and Smart Contracts
The foundation for DeFi developer skills is the ability to create smart contracts which could support DeFi applications. Ethereum is the preferred blockchain network for building DeFi apps as it supports smart contract programmability. Smart contracts are digital variants of legal contracts employed between two parties.
They are practically codes that specify the conditions of the contract and execute automatically upon fulfillment of the conditions by both or either party. Smart contracts can help DeFi projects and protocols to work without any interference from centralized organizations. Decentralized finance applications are collections of smart contracts which can address the functions of centralized institutions without having one.
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The average DeFi Developer salary can range from $67,000 to $175,000, depending on various factors. However, knowledge of programming skills might play a significant part in fuelling your career as a DeFi developer. How? Smart contracts are code, and you need the right mindset for creating DeFi solutions. Candidates must also have a detailed understanding of how cryptocurrency and tokens work in unison with DeFi. You must learn the basics of cryptography, networking, and data structures. Anyone interested in outshining other developers must focus on choosing the right programming language.
The search for a suitable programming language to build smart contracts for DeFi applications finds a good stop at Solidity. It serves as one of the mandatory details in a DeFi Developer tutorial as the preferred programming language for Ethereum smart contracts. Solidity serves promising advantages as the choice of programming language for the decentralization process.
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The body of knowledge required for becoming a DeFi developer can draw you back to the fundamentals in event of trouble understanding certain concepts. In the case of Bitcoin, you can find a significant highlight which has spurred DeFi developer jobs and numerous projects. Before you start pursuing DeFi developer guides, you need to understand the basics of Bitcoin and the working of the first blockchain.
The fundamentals of Bitcoin can help you strengthen your understanding of cryptography, peer-to-peer transactions, and decentralized governance. If you miss out on the fundamentals of Bitcoin, you are more likely to encounter problems in identifying limitations and security risks. Some of the important concepts associated with Bitcoin that you should learn to include the private key and the seed phrase. In addition, the details about the construction of blocks and mining can also help you build a strong foundation for DeFi development.
Ethereum is Your Friend
Ethereum is a special choice for DeFi apps. Even if you have to learn about the Bitcoin blockchain to understand the basics of blockchain, Ethereum is the preferred choice for dApps. You can become a DeFi Developer when you successfully embrace Ethereum and make it part and parcel of your life.
Dig deeper into Ethereum and understand how it works as a state machine, with each transaction inducing an update in the global state of the machine. Ethereum is the foundation for modern-day blockchain development, and you must learn about how Ethereum Virtual Machine, Ether, and storage work on the blockchain. DeFi developers need a detailed understanding of approaches for constructing and broadcasting Ethereum transactions.
The DeFi developer roadmap would also focus on how well you can map the working of Solidity to the functionalities of a smart contract. Other crucial details about Ethereum include transactions, filters, logs and events, which are important for developing applications reading data off-chain. On top of it, you must work on honing your skills in smart contract security. Once you are confident enough to create your first dApp, you are ready to take your first steps toward becoming a DeFi developer.
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Understanding of Finance
The objective of a DeFi developer does not rest only on developing smart contracts for DeFi applications. On the contrary, DeFi developers must also take the concerns of finance into account while designing their applications. The DeFi developer salary estimate might grow higher when the candidate has a better understanding of finance. As a DeFi developer, you would use your programming knowledge to engineer new financial products.
Therefore, you might face the risks of losing money on your DeFi apps or a lot of security bugs. With a clear understanding of finance, you can identify what your users need alongside an idea of the scope of the working of DeFi. Some of the important terms you must familiarize yourself with as a DeFi developer include liquidity, fixed or variable interest rates, debt, margin trading, leverage, order books, and options.
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Practical Experience of DeFi
The quest for DeFi Developer jobs can land you the inevitable requirement for tasks of a DeFi developer. Expertise in Ethereum, Solidity, and smart contract development alongside finance helps you gain a technical advantage in developing DeFi apps. On the other hand, you must understand the practical workings of DeFi apps to develop a better impression of how to build your DeFi applications.
Start by exploring the whitepapers or blog posts on new DeFi projects alongside their goals. The best practice for earning practical experience with a new or popular DeFi application is to use it. At the same time, invest your time in reviewing the code behind the DeFi apps to understand the underlying technology.
Interestingly, you can try some of the recommended measures to improve your practical skills in DeFi. Here are a few suggestions that can help you strengthen your command over practical applications of DeFi.
Use an Automated Market Maker
The Automated Market Maker protocols have evolved as one of the notable highlights in the DeFi ecosystem. They can facilitate trade without having to wait for the other party in transactions. However, trading on an AMM like Uniswap could show you the working of token approvals, liquidity pools, and front-running, alongside the associated risks. In addition, you can learn about the mechanisms for setting the right gas price.
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Serve as a Liquidity Provider
Another practical method to learn DeFi Developer skills would focus on working as a liquidity provider. The roles and responsibilities of liquidity providers can help you understand the important trade-offs. At the same time, you can understand the meaning of impermanent loss alongside learning about the passive yield-generating opportunities from the liquidity you provide.
Borrow Stablecoins through DeFi Protocols
You can also improve your practical skills in understanding and developing DeFi protocols by using a DeFi lending/borrowing platform. For example, you can borrow USDC as a loan from the Compound DeFi protocol. Upon depositing crypto assets in Compound, you would receive cTokens, the liquidity provider tokens of the platform.
Borrowing the stablecoin could help in identifying the details of working interest rates. On top of it, you can learn how the interest accumulates across all balances without individual updates for each user. The Compound protocol could help in understanding the collateral factor alongside the risks associated therein.
Set Up a MakerDAO Vault
The journey to become a DeFi Developer can also involve tasks like setting up a MakerDAO Vault. It can help you learn the unique traits of DAI as a stablecoin alongside the reasons for people mint DAI, along with other crypto assets. You must also pay attention to risks associated with platforms like MakerDAO, especially from a financial perspective. Furthermore, the MakerDAO Vault could help you understand the definitions of liquidation alongside their work.
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How Can You Enter Into DeFi Developer Jobs?
The career path as a DeFi Developer can be quite complicated without any guidance. However, practical skills and the dedication to staying updated with the latest DeFi trends can help you find your desired jobs. Starting from a basic DeFi developer tutorial, you can find trustworthy courses to build your professional understanding of DeFi and related concepts.
Subsequently, you can invest your time and efforts in practical applications of DeFi. It can help you build your skills for real-world uses. On top of it, you must have a close eye on the new innovations in DeFi. At the same time, you must note the emerging practices for bridging DeFi and NFTs. Aspiring professionals can also work on creating their own DeFi apps before entering the labor market.
Some of the common options for a DeFi developer include joining an existing project or creating a new project. Make sure you are a valuable member of the DeFi community with contributions in the form of articles and solutions. Community involvement might help you fetch some valuable employment prospects.
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The overview of skills required for becoming a DeFi developer shows a simple road. However, the growing demand and complexity of DeFi developer jobs is a pressing concern for many aspirants. You need to take your steps slowly as you make your way through the basics of DeFi and practical use cases of DeFi.
Start learning about DeFi with a reliable DeFi developer course to set a clear course of action for professional development. Choose the right set of projects to prove your DeFi skills and knowledge. Learn more about DeFi and become an expert with the 101 Blockchains Introduction to DeFi course.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!