DeFi set to transform lending market

One of the most popular features of decentralized finance (DeFi) is lending. It is fair to say that this feature is expanding to take a significant share of global financial lending space simply because it is easy to use and removes the barriers to accessing loans in the traditional financial system.

Bank loans are not available to everyone

Lending and borrowing are one of the core offerings of the traditional financial system, and most people are familiar with the terms in the form of mortgages, student loans, etc. These are usually granted by banks, which take measures to minimize the risks associated with providing a loan by conducting background checks such as Know Your Customer and credit scores before a loan is approved. It’s a system that is closed to those who cannot pass the banks’ requirements.

The role of smart contracts

DeFi, by contrast, is a system where lending and borrowing can be conducted in a decentralized manner wherein the parties involved in a transaction can deal directly with each other without an intermediary or a financial institution. That’s because DeFi uses smart contracts.

Crypto as loan collateral

A bank will not accept your crypto as collateral for a loan, whereas crypto is central to DeFi platforms. Users can deposit their coins into a DeFi protocol smart contract and become a lender – or a borrower. Usually, the loans are over-collateralized to account for unexpected expenses and risks associated with decentralized financing.

Choosing a DeFi platform for lending or borrowing

The best way to assess which DeFi platform is best for lending or borrowing is by looking at its TVL – total value locked. TVL is a measure of the assets staked in smart contracts and is an important indicator used to evaluate the adoption scale of DeFi protocols as the higher the TVL, the more secure the protocol becomes. The TVL in DeFi protocols has grown by over 1,000% from just $18 billion in January 2021 to over $110 billion in May 2022. One of the best sources for checking TVLs is

Perhaps most importantly, the transparency provided by DeFi platforms is unmatched by any traditional financial institution. These platforms also allow permissionless access, signifying that any user with a crypto wallet can access services from any part of the world. Although you’ll need to check each platform, as some DeFi services are not available in certain jurisdictions, e.g. a European platform may not give access to US citizens, and vice versa.

Money in 2022

This coming year might see many changes in the financial world, especially in money itself. It’s difficult to predict how things might play out, although there have been predictions in the MSM that Bitcoin and crypto generally will crash and burn, but that seems unlikely for those of us that are more immersed in cryptocurrencies than MSM journalists and their readers.

One scenario revolves around central bank digital currencies (CBDCs). Will they be more influential this year as governments look to control digital currencies? Or will the stablecoins, such as Tether, issued by private companies rule the roost? Then there are the decentralised currencies, such as Bitcoin. Will they become the dominant force in finance?

Various factors are driving the debate around money. For example, China is rolling out its Digital Currency Electronic Payments (DCEP) project during the Winter Olympics in February. And the USA is developing regulations targeted at private issuers of stablecoins, whilst adoption of decentralized cryptocurrencies for payments continues to grow around the world.

The Regulations debate

In 2021, the US government debated crypto tax provisions in the infrastructure bill and the approval of a futures-based Bitcoin exchange-traded fund (ETF.) This year it is likely that the U.S. Securities and Exchange Commission will find ways to clarify its position on whether tokens are unregistered securities. At the same time, DeFi tokens may find themselves being included in this debate, which would be unwelcome.

The future of Ethereum

Although Ethereum still dominates DeFi, will its high gas fees for NFTs and other transactions become too expensive? It depends on the success of Ethereum 2.0. There are many big moves to be made before the full 2.0 project can be deemed a success. It has to merge its mainnet with the Beacon chain and that could disrupt token economics for miners and validators. And there are challenging upgrades within Eth 2.0, including sharding. The future of the dominant smart contracts platform depends on these going well.

Crypto and the climate

As climate change continues, crypto needs to shift the conversation away from how bad it is for the environment and towards one about mining-integrated energy systems that create incentives not only for miners to use renewable energy.

Web 3.0

Finally, there will be many discussions about Web 3. Jack Dorsey has been leading at least one discussion about its future, in which people will have greater control over their data and content. So far Web 3 is not really well defined, but there is a need to adjust our systems for managing digital property and for establishing users’ rights in this new era. We can expect this year to bring more clarity on Web 3 might be like and to get a better idea of the projects that will form part of it.

Is this Cardano’s big breakout year?

2021 is a year of optimism for Cardano (ADA) holders. In a recent Forbes article, Billy Bambrough quotes Nigel Green, the CEO of the deVere financial advisory group as saying, “Cardano is now just behind the major headline grabbers Bitcoin and Ethereum. I believe that the price of Cardano will reach all-time highs in the next month, hitting more than $3.”

The drivers of Cardano’s price

Green points to what he believes are the “three main drivers” pushing the Cardano price higher. These are the “broader crypto market rally,” a September upgrade that will give the Cardano smart contract a functionality similar to Ethereum’s, and Cardano’s green energy credentials compared to Bitcoin.

At the time of writing, Coinmarketcap lists Cardano’s price at $2.82, with a high of $2.94 in the last 24 hours and a place ranking of #3. Back on the 13th May 2021, Cardano’s token ADA broke an important all-time-high by hitting the $2 mark.  Plus, it was the only top-ten cryptocurrency rising in value during a historic sell-off period. Remarkably, given its price, it is the fourth most valuable token in the world.

Cardano is the new Ethereum

Isaiah McCall writes, “I’m confident it will be the next Ethereum and have a massive role in web 3.0,” and if he is correct, it may be a good time to add Cardano to your portfolio before the price rises even more.

Cardano community members believe that one day ADA will reach $100. To do that, it would need a market cap of $3 trillion. That’s an issue, as Bitcoin’s market cap has a 1 trillion market cap and has been around since 2009. To put this in perspective, Cardano is 4-years-old and has a current market cap of $61 million.

Cardano’s battle will not really be with Bitcoin, which serves an entirely different purpose. Instead it will be with Ethereum, and Cardano has already positioned itself as the ‘Ethereum killer’ (or its fans have). This does make it sound as if it is a heavyweight boxer looking for a title fight.

Both Ethereum and Cardano are smart contract platforms, and McCall says they “stand to become crypto-Google (and maybe crypto-Yahoo).” Google’s market cap is $1.5 trillion, but McCall suggests that the smart contract platforms can double that.

However, here is what you need if you fancy becoming a Cardano (ADA) millionaire. Based on ADA reaching $100, (it’s just under $2 at the moment) you would need to buy anywhere between $15,000 to $20,000 worth of Cardano to become a millionaire. It will take several years to get to this point – McCall says about four to five years – but Cardano is using some interesting tactics to speed this up.

Cardano’s CEO gives his view

Charles Hoskinson is Cardano’s CEO and founder of IOHK. He is also the man who cleaverly named Cardano “the Ethereum killer., even though he was also a co-founder of the Ethereum blockchain project. Hoskinson has pointed out that although Cardano (ADA) and Ethereum(ETH) have a lot in common – both are types of digital currencies that also function as programmable ecosystems, which means other tokens and applications can be built on their networks – they are taking very different routes.

Hoskinson said in a recent interview, “Vitalik’s project Ethereum has done a phenomenal job with what they have built. They’ve built a great community and a great cryptocurrency. I just happen to disagree about business philosophy and you see those disagreements in Cardano. We are following a very different path.”

He also commented on Bitcoin, saying “Bitcoin was worthless in 2009 and then it was worth a lot in 2013.” However, he said, “You can’t do much with it, you can only push the value, you can issue token. However, you can’t do smart contracts, you can’t do anything. Similar to the earliest days of the internet, with the web browser- you could only look at the static pages.”

IOHK/Cardano in Africa

Cardano meanwhile has an impressive pedigree and a long-term vision for its blockchain and cryptocurrency. In particular its work in Africa attracted attention, as covered recently, IOHK’s “Africa strategy” aimed to foster Cardano adoption in Africa for everyday people and businesses. This included goals such as engaging with local stakeholders to deliver projects that solve real issues in the market, as well as to train and educate local developers to create solutions for local problems. For example, with IOHK’s Ethiopian Blockchain Deal, Ethiopian schools will use the Cardano blockchain to track student performance.

At the time, Hoskinson said that Cardano was “at the cusp” of deals and initiatives” through public-private partnerships in certain nations in Africa. Thus making way for “millions of users” to enter the Cardano ecosystem this year. According to him, if the Cardano team is able to achieve these goals, it will enable “a new economy” of over “5 trillion dollars of wealth.” He also said he believed that Africa is not a poor continent, and argued that the only challenge was that “real wealth” was “inaccessible due to bad systems.”

The sentiment is bullish for Cardano

Analyst and trader Benjamin Cowen in a recent video projects ADA’s potential to hit $20, this bull cycle, outperforming Bitcoin. Meanwhile, data from Google Trends depicted that interest in the search term “Buy Cardano” has hit a three-month high.

There is a lot of excitement on Twitter as well. One fan tweeted, “Smart contracts on Cardano only weeks away, who’s excited?!” Certainly its followers are feeling fairly pumped about September for Cardano, and believe it will flip ETH, especially in the NFT market, with one believing Cardano will own the space because of its lower gas fees. Another user called COTI tweeted, “The NFT auction platform which we developed with Cardano is LIVE. We are excited to have a key role in launching NFT auctions with Wolfram Blockchain Labs and Cardano.”

Which brings us back to Nigel Green at deVere: “I’ve been bullish on Cardano for a long time, amongst other cryptocurrencies.  But there’s a now real sense it is about to break out.”

Read this before October 2021 if you’re in crypto!

For those of us who believe in the concept of decentralization that underpins Bitcoin, I believe we are shortly going to receive a shock in the form of new regulations. The wealthiest countries in the world are snapping at the heels of the crypto universe and are looking at ways they can use financial regulations to bring fintechs, exchanges and crypto owners into line.

What do governments want to restrict?

Here’s a list of ‘things’ they are planning to target:

  • Peer-to-peer transactions
  • Stablecoins
  • Private wallets (phone, desktop, cold storage)
  • Privacy (privacy coins, decentralized exchanges, TOR and I2P)
  • Former ICOs & future projects (NFTs, DeFi, smart contracts, second layer solutions and more)

What is their intention?

At it’s most basic, you could say that they want to know EVERYTHING!

They want to:

  • Businesses active in crypto to be licensed and regulated like banks
  • Ensure full transparency for all transactions
  • Have the ability to freeze crypto assets belonging to persons or countries they believe are a ‘risk’
  • Force the disclosure of user information for all transactions
  • Revoke licenses of any that don’t comply with regulations.

They want control of a space that emerged precisely as a reaction to government and bank controls on money, both of which allowed a global financial crash to happen in 2008.

Why do governments suddenly want more regulations?

The answer is fear. Wesley Thysse in his document “Government Planning Worldwide Regulation of Bitcoin”, he points to one event that suddenly made them sit up and take real notice of cryptocurrencies, and that was Facebook’s 2018 announcement that it intended to create and launch a ‘so-called’ stablecoin. As Thysse says, “Until then they didn’t see cryptos as a risk to the global financial system.”

Why did Facebook’s Libra coin, as it was called at the time, send a ripple of unease through wealthy governments? Because Facebook’s billion users would have access to an instant payment system that was faster and more importantly cheaper than anything offered by the existing financial system.

Governments and the central banks huddled together in talks about what to do, and engaged an organization called Financial Action Task Force (FATF). Its goal is “to protect the integrity of the global financial system.” A real Big Brother!

FATF has already passed similar legislation for global governments, and it is the organization behind the rule insisting that all cryptocurrency exchanges that exchange fiat for crypto have the same KYC and anti-money laundering requirements as banks. What they will do now is turn their attention to all the elements of the industry outside this kind of control and as Thysse says, “declare what is, and isn’t acceptable.”

In 2018 FATF set out to control money laundering and terrorist financing, but now it is going much farther, and they are making swift progress. The document anyone in the crypto space should be looking at right now is FATF’s ‘Guidance for a risk-based approach to virtual assets and VASPS’ (GVA). This is due to be implemented in October 2021. Furthermore, it is impossible to move FATF out of its powerful position, because the organization is protected by the Vienna Conference on Diplomatic Intercourse and Immunities, which means they enjoy immunity with regard to their actions and are unburdened by the rules the rest of us must live by.

The so-called public consultation on the GVA was a farce, as they only chose the feedback that suited their agenda. They have delayed the implementation of the GVA until October, but after that expect to see their recommendations being implemented at national level, and in our legal systems. You should also note that the GVA will not apply to central bank-issued digital currencies. So, the agenda is very clear!

It may not be all bad news

As much as those dedicated to crypto may be horrified by all this, let’s take a moment to look at a possible upside: regulations may just pave the way for mass adoption, something the crypto community has long been waiting for. But at what cost? However, I urge you all to read the FATF GVA, because in just a few months it is going to start affecting your life, and most likely it won’t be in the way you would like.