Prove using the definition that: $$\displaystyle\lim_{n\to\infty}\frac {n^2-1}{n^2+1}=1 $$
What I did:
Let $\epsilon >0$, finding $N$: $\mid\frac {n^2-1}{n^2+1}-1\mid=\mid\frac {-2}{n^2+1}\mid\le\mid\frac {-2}{n^2}\mid=\frac {2}{n^2}\le\frac {2}{n}$ So $N=\frac 2 {\epsilon}$.
So for all $n>N$ we'll want to show that: $|a_n-l|<\epsilon \Rightarrow \mid\frac {n^2-1}{n^2+1}-1\mid=\mid\frac {-2}{n^2+1}\mid<\mid\frac {-2}{N^2} \mid=\mid\frac {-2}{\frac 1 {\epsilon^2}} \mid=\mid -2\epsilon^2 \mid=2\epsilon^2$
But that isn't smaller than $\epsilon$ so I'm doing something wrong here and I don't know what...
You were almost there, but near the end you strayed from your correct scratch work.
The red inequality is not incorrect, but by using it you're discarding the work you've done before.
Along the line of what you did before, you should have done:
$$\left|\frac {-2}{n^2+1}\right|<\dfrac 2n<\dfrac 2 N=\varepsilon.$$
Apparently you allow for real $N$ in your definition. If you wanted a natural number $N$, it would suffice to take a natural number larger than $\dfrac 2\varepsilon$, (they exist).