What is DeFi

Decentralized Finance (DeFi)  has been cropping up a lot lately in Crypto news and rightly so! It’s an ambitious and interesting proposition. If it achieves more mainstream adoption it could represent a major threat to traditional financial systems.

What is DeFi

DeFi or decentralized finance is a structure of financial applications running on top of blockchain systems. The idea is to create financial services and products using decentralized networks and open source software.

Whats Wrong with our Financial Systems

Our traditional banking systems are completely centralized and hold absolute power over accounts. This means that:

  • Banks can delete or freeze accounts
  • They can refuse to let you open an account
  • Some banks won’t let you use your account to buy and sell crypto
  • You need documents such as a passport to open an account

Banks also rely on slow outdated systems. If you have ever tried to send money overseas you’ll soon realise that it can take days for your money to arrive.

To open a bank account you need to have documentation. Lack of documentation is  a major limiting factor for many migrant workers. Not having a bank account means they can only transfer money home using organizations like Moneygram and Western Union. These organizations typically charge large fees. Charges can average 7%  and even up to 10%.

Then there is the story of high fees and charges. According to reports large American banks took in over $30 billion in overdraft fees in 2019. In a society where most families are living from one pay check to the next these fees are pushing them further into debt.

The Benefits of DeFi

DeFi is permissionless. You only need Internet and a Smartphone to access it. Smartphone ownership has increased significantly over the years particularly in developing countries. It is in these developing countries that most of the worlds 1.7 billion unbanked people live.

DeFi gives them access to financial services such as loans. With loans they can set up businesses, pay for education and improve their quality of life.

DeFi is decentralised. Records are kept simultaneously across thousands of computers instead of a central server. This means that all the transactions are publicly auditable unlike traditional bank records.

Censorship resistance is also another key feature of DeFi. In the traditional financial system it is possible for central parties to invalidate and stop transactions. With DeFi this is not possible,

DeFI can also let your money earn interest. Dapps such as Compound use smart contracts which enable you to lend out your cryptocurrency and earn interest. This is in stark contrast to many banks where if you leave your money in a savings account you earn little or no interest, even negative interest rates can be applied.

In fact most times you are paying the bank fees to mind your own money!

The Downside of DeFi

The majority of problems and risks associated with a DeFi project are generally associated with the technologies they are related to. The challenges with blockchain are generally responsible for fueling the downside of DeFi.

Inaccurate pricing oracle information can also be a downside of DeFi. Pricing oracles send information back to blockchains. They act like messengers sending real time price info. There are different types of oracles – centralised oracles such as Coinbase and decentralised oracles, used by DeFi platforms and decentralised exchanges.

If there is huge demand transactions on DeFi protocols could become highly expensive during the period of congestion.

Also DeFi is reliant on a blockchain. If there are any technical problems with the blockchain the DeFi project could become extremely unstable.

Key management is a real vulnerability for DeFi protocols. If key holders lose control of their keys, they lose access and effectively ownership, of their tokens.‍

Multi-signature key approaches have been developed placing user deposits in custody of consortiums. However, placing admin keys in multi-sig key
arrangements can be exploited.

Liquidity is also another concern with DeFi. At the moment the DeFi market is not as big as the traditional financial systems. Users could find it difficult to put their trust in a sector that does not have much liquidity as the usual financial sector.

DeFi projects are undoubtedly a method to provide financial inclusion for a broader population, especially the unbanked and people in developing countries. I for one will be watching DeFi carefully to see how it evolves.

If anyone would like to learn more about DeFi the University of Nicosia is running a free online course. Check it out. I’ve signed up already.


El Salvador’s Love Affair with Bitcoin


El Salvador is the first country in the world to make Bitcoin legal. Will this be the answer to the nation’s financial woes? Or will it be a match made in hell? Let’s find out more!

The Beginnings of a Financial Romance

Unless you’ve been living under a rock for the last while, you must have heard that El Salvador recently passed a bill to make Bitcoin legal tender. In fact, the bill was passed by a large majority, gaining 62 out of 84 possible votes within Congress. Under the new law, which will be implemented in September 2021, Bitcoin must be accepted by firms when offered as payment for goods and services. Tax contributions can also be paid in cryptocurrency.

However, El Salvador is not getting rid of the US Dollar all together. El Salvador’s President Nayib Bukele stated:

‘The use of Bitcoin will be optional, nobody will receive Bitcoin if they don’t want it. If someone receives a payment in Bitcoin, they can choose to automatically receive it in Dollars’

El Salvador is the first country in the world to make Bitcoin legit. You might be wondering why this is such a big deal for El Salvador as well as several other Central and Latin American countries. Let me explain by first giving you some history on the nation that is El Salvador.

This small Central American country’s past is a troubled one. It has endured political and economic instability with a series of coups, revolts, and a succession of authoritarian rulers. Persistent socioeconomic inequality and civil unrest led to the Salvadoran Civil War which took place between 1979 and 1992. Due to this constant state of conflict, El Salvador has been ravaged by poverty and gang-related criminality.

Traditionally, El Salvador relied heavily on coffee exports for revenue. However, they later looked to diversify their international exports and the economy by opening up trade and financial links as well as expanding their manufacturing sector. To facilitate trade and attract foreign investment, El Salvador dropped its own currency, the Colon, in 2001 and adopted the US Dollar.

So what has all of this got to do with Bitcoin? Well, simply put, adopting the US Dollar didn’t solve El Salvador’s financial problems. The foreign trade that was promised, the high-quality jobs, the foreign investment, the increase in exports…all of this didn’t come to pass. So how does El Salvador keep its financial head above water?

Foreign remittances is the answer. In 2019, foreign remittances amounted to the equivalent of 16% of the country’s GDP. Many Salvadorans migrate to the United States to find work so they can send money home to their families, and foreign remittances allow them to accomplish this.

Naturally, this is where Bitcoin comes in. Now as many of you know, sending money through the traditional banking system is slow and expensive, because everyone wants a slice of the pie. Moreover, opening a bank account requires legal documents, like a passport. This is a major issue in developing countries where accessing official documents is typically expensive, time-consuming and complicated.

Bank accounts…now that’s another problem! According to President Bukele:

‘Some 70% of people in El Salvador lack access to traditional financial services.’

So, with such a large percentage of the population unbanked, Bitcoin could solve a lot of problems by getting money from abroad, quickly and far more affordably.

Not Quite a Fairytale?

Many arguments have been put forward criticizing El Salvador’s decision to make Bitcoin legal tender. The IMF and World Bank have outright refused to assist with the roll-out. The World Bank cited that they had problems with the transparency of Bitcoin transactions and the environmental impact of Bitcoin mining.

Excuse me? Did they not hear President Bukele say that El Savador will mine Bitcoin using geothermal power from the country’s volcanoes?

 More on that in a follow-up article. Stay tuned!

One common argument is that using Bitcoin is too difficult and risky for the average person. To address this issue, President Bukele has committed to offering training to people and initiatives promoting the use of Bitcoin.

He is also launching an e-wallet called Chivo, which is Salvadoran slang for ‘cool.’ As part of the package, people who make use of it will receive $30 in Bitcoin so that adoption is incentivized.

Athena Bitcoin announced plans to install 1,500 Bitcoin ATMs in El Salvador, targeting places where residents receive remittances from abroad. This should make it easier for people to buy and sell Bitcoin.

President Bukele was asked whether the use of Bitcoin would encourage criminal activity and money laundering. This is a common argument often used by opponents of crypto and Blockchain. He replied that criminals are already using the Dollar…

‘The problem is not the Dollar, it is the criminals.’*

Another argument is that Bitcoin is highly volatile, which makes it risky. However, with rampant inflation across many Central and Latin American countries, the volatility of Bitcoin doesn’t hold a candle to the levels of inflation these nations have endured. For example, Argentina is battling an unsustainable debt load while Venezuela’s economy has shrunk by 75% since 2013. Nice job fiat currencies!

Dissenters have often said that Bitcoin transactions are slow and expensive. Slow? I’m not so sure about that. I’ve personally had to wait longer than 10 days for money to arrive in my bank account from abroad. In my opinion, Bitcoin is definitely the hare while banks are more like the old arthritic tortoise…

Also, don’t forget Jack Mallers’ Strike app and the Lightning Network. The Strike app makes it fast and cheap to send and receive small amounts of Bitcoin. This is because Strike is powered by the Lightning Network, a layer 2 protocol that settles transactions ‘off-chain’ through a growing network of user-hosted channels and nodes. In fact, the Strike app has quickly become the most popular one in El Salvador.

Expensive? Start looking at organizations like Western Union and MoneyGram…the fee system is mind-boggling! Fees differ depending on where you’re sending your money, whether you’re using a bank transfer or a credit card, or even whether your recipient is receiving the money as cash or into a bank account. Also, one time a relative sent me some money via Western Union, I had to show my passport to prove my identity. So as it stands, the use of personal documentation is necessary to transact in the legacy financial system.

 Making It Together

Whether other Central and Latin American countries follow El Salvador’s lead and make Bitcoin legal tender remains to be seen. The reaction of the IMF and The World Bank is certainly something to take into account. Do they really believe Bitcoin is too risky and simply don’t want to be associated with it? Or do they see Bitcoin as a threat to the financial status quo and therefore their power and influence? Hmmm…

In my opinion, anything that shakes up the traditional financial system is only a good thing. Whatever happens, you can be sure that I’ll be bringing you all the latest updates on El Salvador and Bitcoin as they occur. Until next time!

Bitnob Changing Lives in Africa

Africa is adopting crypto at a crazy rate, and so far, Nigeria and Kenya top the charts. In fact, a recent report by reveals they are two of the top 10 countries globally for crypto adoption (Kenya is 5th while Nigeria is 6th). Let’s take a look at a project that is helping to drive this trend, Bitnob.

Based in Nigeria, Bitnob is a platform that makes it easy for individuals and businesses to buy and save Bitcoin. Users access Bitnob through a mobile app that’s available for both Android and iOS. With staggering rates of inflation, Nigerians are always on the lookout for ways to save money, so it’s no surprise that platforms like Bitnob are really taking off.

Cool Features

Not only does Bitnob help people buy and hold Bitcoin, they also release free weekly educational webinars. These webinars teach people how to use Bitnob and everything they need to know about Bitcoin and investing. These webinars play a major part in Bitnob’s mission to help people achieve financial freedom.

Bitnob has some really nifty features including a referral program based on the concept of Ubuntu, a Zulu word that means ‘community.’ According to co-founder Adeolu Akinyemi

 ‘In Africa, we depend on each other, rely on each other and really need each other. It’s a concept called Ubuntu: when we are good, then I am good’

The program is designed to celebrate and reward Bitnob users and encourages them to spread the word about its efforts to lower the barrier to entry to Bitcoin.

With the referral program, users can earn cash rewards when they encourage their family and friends to sign up for Bitnob. To add a further fun twist to the program, there is also a leaderboard where people can earn points for the number of successful referrals they achieve. People on the leaderboard are known as Bitnob Ambassadors, and there are several levels they can attain including Bronze, Silver, Gold, Platinum, Diamond, Ruby, and MVP.

Another interesting feature of Bitnob is that it provides an easy way for users to Dollar-cost average (or DCA) Bitcoin. Dollar-cost averaging is an investment strategy used to reduce the impact of volatility when purchasing high-risk financial assets like stocks and cryptocurrencies. With DCA, you schedule regular purchases at a set amount. Using Bitnob, people can regularly buy as little as $1 worth of Bitcoin. There is also a handy Dollar-cost averaging calculator. This makes it easy for people to work out their earnings based on the current market value.

At present, it’s not possible to buy Bitcoin in Nigeria using a bank account. In February 2021, the Central Bank of Nigeria ordered banks to close the accounts of crypto traders.

However, Bitnob figured out a clever workaround to counter this problem using Ovvar vouchers, which are sort of like mobile phone top-ups. First someone must buy an Ovvar voucher from a vendor, which are apparently common in Nigeria. Once a voucher has been purchased, a code is sent directly to the purchaser’s mobile phone. They then input this code into their Bitnob account, and the money is transferred. Simple right?

Bitnob also offers NobCredit, which allows users to make use of instant crypto-backed loans. With NobCredit, users can take out flexible loans with zero hidden fees or penalties and use their Bitcoin balance as collateral. In this way, Nobcredit allows users to meet urgent financial obligations while continuing to HODL their Bitcoin.

 Lightning News

As if all these cool features weren’t enough Bitnob, recently announced that they had successfully integrated the Lightning Network into their platform. On August 19th 2021, Jack Mallers Tweeted a video of himself sending money from his US bank account to Nigeria using Bitnob and the Lightning Network. The transactions took seconds!

So what does the Lightning Network mean for Bitnob? So through the integration of this revolutionary technology, Bitnob becomes a node within the network. This means it can connect to other Lightning Nodes for processing transactions. As a result, Bitnob users can easily send Bitcoin to other platforms and Bitcoin wallets that have Lightning Network functionality.

The Lightning Network means faster transactions, so Bitnob users can confirm deposits and withdrawals within a few seconds instead of several minutes.

In addition, the Lightning Network allows users to send smaller amounts of money that would not have been possible with the on-chain network due to high fees. This opens Bitnob users up to a new world of possibilities including paying for utilities, buying data, and performing mobile airtime top-ups.

Bitnob is just another example of one of the ingenious crypto projects operating out of Africa. With a large and educated population of young people and rampant financial instability, it’s no wonder why Bitcoin adoption is gaining pace in Africa.

Lightning Network Explained

Bitcoin is great in many ways. It’s border-less and decentralized. It provides an efficient way to transfer money anywhere in the world without the need for banks. It puts you in charge of your money.

However, despite all these plus points bitcoin does have certain drawbacks.

Transaction speeds can be slow. On average only 7 transactions are processed every second. Compare this to Visa which can process over 65000  transactions per second and you realize just how slow bitcoin transactions are.

Transaction fees can be high. Blocks on the network can only contain 1MB of information. If there are a lot of transactions, miners will process the ones with the highest fees first. If you haven’t paid a high enough fee your transaction could be left waiting for days.

These issues mean that it’s difficult to use bitcoins for micro-payments. Micro-payments are everyday payments such as buying groceries or gas. Using bitcoin to buy your cup of coffee is just not feasible at the moment. You could end up waiting ages until your transaction is confirmed. Your coffee will be cold and the transaction fee may be higher than the price of the coffee!

Lightning Network offers a solution to these problems.

What is Lightning Network

Lightning Network is a second layer solution built on top of the Bitcoin blockchain. If the blockchain is the first layer, Lightning Network is the second layer. Lightning Network enables users to send transactions within payment channels that work outside the bitcoin blockchain.

This makes the transactions super quick and much cheaper.

The Benefits of Lightning

Solving Scalability

Bitcoin does have problems with scalability. The more transactions there are, the slower the network becomes.

Back when bitcoin started out there were few transactions usually carried out by passionate enthusiasts. However, bitcoin use has been steadily increasing over the years and at the time of writing, there are roughly 281,727 transactions every 24 hours.

As bitcoin adoption becomes more widespread the number of transactions taking place daily will surge. If the network struggles to cope with an increase in transactions, fees will increase and transactions may not be confirmed for days.

Lightning has the potential to solve these scalability issues by enabling multiple transactions to take place off the main blockchain.

Low Transaction Fees

Bitcoin fees can be very variable and at times can be extremely high. With Lightning, transaction fees are minimal. This means you can carry out small transactions, even as small as one Satoshi! A Satoshi is the smallest unit of bitcoin, it is one hundred millionth of a single bitcoin (0.00000001 BTC)

Faster Transactions

Lightning Network promises fast transaction times. Transactions could be settled in seconds or even instantaneously. If Lightning achieves mass adoption it could provide stiff competition to Visa and Mastercard.

The Downside of Lightning

Ease of Use

Bitcoin is not the easiest system for beginners to handle. Lost passphrases, lost passwords, confusing fees and complex addresses are just some of the difficulties faced by new users. Smartphone wallets have made great strides in helping beginners transact with bitcoin. But there are few smartphone apps available to help make lightning easy to use.


There are some concerns that well funded nodes with lots of payment channels may become very powerful. These nodes could potentially monopolize the network and cause the system to become more centralized. The complete opposite of what Bitcoin is all about.


New research has shown that Lightning Network may have privacy issues. Researchers probed the channels of the network by sending different sized payments. They were able to find the balance held within the channel fairly easily and with no expense incurred.

How Does Lightning Work

Alice and Bob want to send bitcoins to each other. They open a payment channel and deposit bitcoins. This initial transaction is broadcast to the Bitcoin blockchain. Within this channel, they can transfer bitcoins as many times as they want. The transactions are basically a redistribution of the bitcoins within the channel.

When either Alice or Bob want to leave the channel their last transaction is broadcast to the bitcoin blockchain. Alice and Bob could have made limitless transactions within this channel but only 2 transactions are sent to the blockchain.

What if Bob tries to back out of the payment channel without honoring the transactions?

If Bob decides to cheat, his initial deposit gets sent to Alice. This harsh penalty acts as a deterrent against fraud.

The Network Effect

The above example only describes transactions between two parties. What happens if you want to send payment to someone but you don’t want to open a channel with them? This is where the Network effect comes into play.

Alice would like to buy coffee from a coffee shop using bitcoins. Unfortunately, she doesn’t have a payment channel set up with the new coffee shop she wants to try out.

Using Lightning Network Alice can transfer bitcoins by jumping through other interconnected payment channels. The only requirement is that the payment channels must have enough bitcoins in them to cover her transaction and the other transactions routing through.

This Network effect makes it possible to send micro-payments throughout the world quickly and cheaply.

In Conclusion

This is a very general overview of Lightning just to give you an idea of its potential. In reality, it is a lot more complex than the way it has been described here. Having said that Lightning Network does have the potential to shake up the existing financial system. It enables money to be sent anywhere in the world without using banks or third parties. It could provide an opportunity for the world’s 1.7 billion unbanked to access financial services.

Lightning Network could also be the catalyst that triggers mass adoption of bitcoin and cryptocurrency. If payments can be made almost instantly, worldwide and without  high fees the argument for using cryptocurrency is extremely compelling.

Lightning Network still has a way to go before it is rolled out completely. At the moment it is still in testing and its adoption has been slow.

However, I am interested in tracking its progress and look forward to seeing its effect on the crypto community.