Interest in Decentralized finance (DeFi) has exploded in recent years. DeFi, which initially started as one of the buzzwords thrown around in relation to global finance, is a trend that has transformed the cryptocurrency space. By definition, DeFi is a set of financial providers set up on a public blockchain.
For the uninitiated, a blockchain is a public ledger that allows financial transactions to be carried out without third parties such as banks, government institutions and business corporations.
The catch here is the decentralized nature of DeFi, as the name suggests, which gives users ultimate control. This new technology enables individuals to operate their own banks and profitably utilize all the services provided by the traditional banking system.
According to the Global Trade Review, DeFi removes the barriers to lending, uses smart contracts, and is much cheaper than traditional lending with higher returns for investors. Per data from Statista, the global market size of DeFi is $77.29bn, while the number of DeFi users as measured in unique addresses is 4.8 million.
However, despite the seeming opportunities that DeFi offer, it can’t however completely replace the traditional finance system as widely believed by many folks in the crypto space. This was the view expressed by the CEO of Bundle Africa, Emmanuel Babalola.
Babalola made this known while delivering a keynote address titled, DeFi in Africa – Possibilities beyond the Hype, at Technext Coinference 2.0, the largest blockchain gathering on the continent, held at Landmark Event Center in Victoria Island, Lagos, on Monday, October 3rd, 2022.
According to him, the significant difference between DeFi and banks is that DeFi is the global peer-to-peer infrastructure.
He cited figures from tracking service DeFi Pulse which shows that the value of digital assets locked into DeFi services grew from less than $1 billion in 2019 to over $15 billion at the end of 2020, and over $80 billion in May 2021.
“Yet DeFi is still in its early stage,” he said.
Babalola also debunked a number of myths about the possibilities of DeFi, noting that the technology isn’t safer than traditional banks nor does it have the potential to eliminate banks from society.
“Back then, we wanted to replace the existing [financial] system. But over time, we have come to realise that in the ideal world, many of the existing systems would have to evolve. When Satoshi created Bitcoin, It was meant to be an alternative and not a replacement,” he said.
Africa must embrace DeFi
For Babalola, in an ecosystem of opportunities where big techs or governments don’t control user interaction and content creation, decentralised fiat onramp channels like Cashlink can help users onboard and enable them to access always-on financial services globally instantly and for free.
He isn’t wrong. One thing is sure: being the fastest adopter of cryptocurrency in the world, Africa surely mustn’t sleep on the DeFi revolution as it is poised to transform the financial ecosystem on the continent by facilitating access to financial services and inclusion.
Related article: DeFi funding grew by 851% in 2021; What to expect in 2022.
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