This guide aims to provide a basic understanding of converting fiat currency into stablecoins and using stablecoins in a public blockchain environment. It is tailored for individuals who are new to cryptocurrency. With stablecoins like USDC and XSGD, which are regulated, you can participate in DeFi without speculating and use them for real-world purposes such as paying individuals and businesses. Once you have acquired stablecoins, you can explore the DeFi ecosystem further and consider purchasing ETH or WBTC if desired. This article is specifically catered to users in Singapore.
To start, I suggest the following:
Both Coinbase and Circle (the issuer of USDC) are licensed as Major Payment Institutions by the MAS.
Buying USDC from Coinbase
To get started, you'll need to create a Coinbase account. Go to Coinbase.com or download their app. If you're in Singapore, you can easily set it up using SingPass. Once that's done, you'll need to transfer money into your account. You have the option to use a FAST transfer or PayNow, both of which are simple and provide instant transactions.
Once you have funds in your Coinbase account, you can purchase USDC. I should note that are also some fees charged by Coinbase for this. The USDC bought from Coinbase is initially on the Ethereum network, and you can only transfer it to other wallets within the Ethereum network. However, you also have the option to convert USDC to other blockchain networks such as Polygon or Solana through a bridging process.
You can send USDC directly to another (Ethereum) wallet from your Coinbase account. There will be some network fees (gas fees) involved with this.
You can choose to just use your Coinbase account, without setting up any other wallet.
However, if you want to set up a self-custodial wallet, proceed to the next step. I highly recommend this option because it aligns with the purpose of DeFi, which is to give you control over where your money is stored.
While it is convenient to keep your funds in Coinbase, storing them in your own wallet provides safety from the crypto exchange going bankrupt. However, it also introduces other risks, such as the possibility of getting hacked. You will need to weigh the trade-off between convenience and trust in the crypto exchange, versus the ability to safeguard the stablecoins yourself.
Another important aspect of a self-custodial wallet like Metamask is that it enables you to interact with other DeFi applications, such as Uniswap.
Setting up a Metamask wallet
What is Metamask? Metamask is a browser-based application and a mobile app that allows you to access the same wallet on both platforms, making it convenient. This type of wallet is called a self-custodial wallet.
To begin, start with the browser-based version. You can download it from Metamask. You can install the app later.
Once you’ve installed the extension, click on it (the fox) to get started. Since you’re starting from scratch, click ‘Create a new wallet’.
Set up a password as per normal on any other application or website.
Next, we come to the important step of saving your Secret Recovery Phase: a 12-word phrase that will act as the ‘master key’ to your wallet and funds. Click on ‘Secure my wallet’.
To ensure the security of your 12 words, it is recommended to either save them in a password manager or write them down and store them in a secure location. Avoid storing them in Google Docs, email, or the Apple Notes app. After doing so, you will be prompted to confirm the words.
Congrats! You’ve set up your wallet and are now ready to self-custody your stablecoins.
The part in blue represents your public address. You can copy and paste it into Coinbase to transfer USDC from Coinbase to your wallet. Alternatively, you can scan its QR code using the Coinbase app. To display the QR code, click on the three dots and select 'Account details'.
Once you have transferred USDC into your Metamask wallet, you can make payments by clicking on 'Send'. It is important to note that unlike other FinTech and banking applications, transactions cannot be reversed once sent. Therefore, it is crucial to ensure that you are sending the payment to the correct address.
You can also track your transaction on Etherscan. It is worth mentioning that your account and public key are publicly viewable on Etherscan. If someone is aware of your real-world identity and links it to your public key, it could potentially pose a risk. Hence, it is important to be cautious about such linkages, especially from web3 social media applications.
When sending transactions from your own wallet, you'll need to maintain a balance of ETH (Ether, the native crypto-asset of the Ethereum network) to cover 'gas fees'. To ensure proper functionality on the Ethereum network, you may need to purchase ETH from Coinbase and transfer it to your wallet. Before sending a transaction, the application will estimate the current gas fee. At the time of writing, gas fees are approximately $10 worth of ETH, which is relatively affordable compared to peak periods when fees can reach up to $200.
Estimates of gas fees can be found on Etherscan: https://etherscan.io/gastracker
The gas fee issue is another reason why it makes more sense to use USDC on Polygon, as the fees are much cheaper. This leads us to bridging USDC from Ethereum to Polygon.
Bridging USDC from Ethereum to Polygon
That concludes this short tutorial. In the future, I will provide more information on switching networks and making trades using Uniswap. Stay safe!