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Zapper Finance (Zapper.fi) simplifies entry to the DeFi sector by allowing users to manage liquidity investments in different DeFi protocols, all from the comfort of one single application. Alongside liquidity management, the application allows users to keep track of their investments via the portfolio tracker.
Zapper.fi allows users to "zap" in and "zap" out of liquidity pools with a single click. This means a user can more easily navigate liquidity pools that exist on platforms such as Uniswap, Curve Finance or Balancer.
In this guide we will teach you how to use Zapper to simplify your DeFi experience as well as give you some tips on how to reduce those costly gas fees.
Zapper.fi and other DeFi protocols are experimental works in progress. Funds deposited into Zapper.fi or DeFi protocols in general can be at risk of smart contract vulnerabilities, malicious developers and hacks. Zapper.fi is governed by token holders through a DAO (decentralized autonomous organization).
Decentralized finance (DeFi) is now a dominant sector of the cryptocurrency industry with hundreds of DeFi protocols now filling the space. DeFi protocols aim to decentralize traditional financial services and remove the need for a centralized governing entity.
Within that framework, there are several DeFi protocols that rely on individual users to provide liquidity via liquidity pools. This is a unique feature of DeFi. Financial liquidity is usually provided by large centralized organizations. In the DeFi space, there are plenty of opportunities for individual investors to earn a return on investment from their cryptocurrency assets.
However, DeFi can be a difficult ecosystem to navigate, even for experienced cryptocurrency users. It requires an intermediate understanding of the Ethereum blockchain and an understanding of how different DeFi protocols work and communicate.
This is where Zapper comes in. Zapper provides a single interface for interacting with leading DeFi protocols on Ethereum and a small number of other blockchains. Instead of switching between several protocols and making numerous transactions, Zapper allows you to do everything in one go, which can also save you money on gas fees.
All in all, Zapper makes for a very smooth DeFi experience for users of any skill level.
The dashboard gives you an overview of where your funds are currently allocated across the following:
The Zapper.fi dashboard showing how assets are distributed
Founded in 2020, Zapper.fi involved the consolidation of two previous products called DeFiZap and DeFiSnap. DeFiZap was focused on using smart contracts to remove the complexities of accessing DeFi, whereas DeFiSnap allowed users to easily track positions. The combination now works together to form the basis of the Zapper.fi product.
Zapper.fi is a DeFi product rather than a DeFi protocol. This means that the application itself is not decentralized. Although centralized, the application is non-custodial meaning that a user always holds control of their private keys.
Zapper.fi works by moving you in and out of DeFi positions with a single click. This removes the necessity of interacting and navigating the websites of individual DeFi platforms. The Zapper.fi application does this from a single user dashboard and all it requires is validation from a single Ethereum address.
For example, if you want to provide liquidity to a pool, you need to deposit a pair of tokens, but might only have one half of the pair. Thus you would need to first trade something for the second token, and then stake both tokens. Some pools also let you take the liquidity provider tokens (tokens that you receive in return for providing liquidity) and stake those for additional rewards. As you can see, there are quite a few steps involved which can be quite confusing for anyone new to DeFi. Zapper instead allows you to do all of this in "one click".
Let's take a look at a real world example.
An investor holds ETH and wants to enter a position in the Uniswap ETH-USDC liquidity pool. Usually, the investor would need 50% ETH and 50% USDC to enter the pool. This would require a few transactions before entry to change 50% of their ETH holdings to USDC. Using Zapper.fi this process can be completed in one transaction. The investor can be "zapped" into the ETH-USDC liquidity pool with a single click. Any exchanges are completed for them. This saves both time and gas fees.
Users can provide liquidity via a single screen which bundles all necessary transactions.
To use the Zapper.fi platform a user will need to connect a web 3.0 digital wallet, such as Metamask or Formatic.
Zapper will automatically trade tokens on your behalf to provide liquidity to the desired pool.
It is just that simple. Any necessary exchanges for the chosen liquidity pool will be completed in the background of the application.
By completing multiple exchanges in one transaction Zapper.fi can often save users gas fees when entering a liquidity pool.
With any DeFi related protocol or product, there are associated risks attached to use. Zapper is an Internet website and like anything on the Internet, it can be fraudulently replicated. Make sure you are on the correct Zapper.fi website before use. Bookmark the correct webpage in your browser.
The use of Zapper.fi directly involves the use of DeFi protocols. When a user places cryptocurrencies into a liquidity pool you are automatically taking on the risks associated with that DeFi protocol. Make sure you understand and know the risks associated with each one, including impermanent loss.
Zapper.fi and all DeFi protocols work on smart contracts. These smart contracts are liable to "bugs" that can cause malfunctions in any related system. Although hard to predict, it is a risk that should be taken into consideration.
Slippage is a problem that plagues some DeFi exchanges and can be amplified on the Zapper.fi platform due to the "middleman" effect – since you are not directly transacting with each DeFi protocol the risk of slippage increases. This can be countered by specifying the max slippage parameters before any transaction.
Zapper.fi truly simplifies the process of entering the DeFi ecosystem for those investors looking to take advantage of the multiple yield farming and liquidity providing opportunities that currently exist. Along with simplifying entry, the platform also removes the tedious process of tracking all DeFi allocations that may extend across several DeFi platforms. A great bonus.
Although currently focusing on the Ethereum, Fantom and Binance Smart Chain ecosystems, the team may expand to other blockchains in the future.
Whether products shown are available to you is subject to individual provider sole approval and discretion in accordance with the eligibility criteria and T&Cs on the provider website.
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