SA crypto players diversify portfolios with DeFi coins

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Most DeFi protocols and apps are built on Ethereum.

Most DeFi pro­to­cols and apps are built on Ethereum. 

South African cryp­to-cur­ren­cy exchanges are increas­ing­ly intro­duc­ing decen­tralised finance (DeFi) coins on their platforms.

This, as they see a height­ened appetite from the local mar­ket to embrace DeFi coins, which are grow­ing in pop­u­lar­i­ty globally.

Accord­ing to Kubera, a DeFi coin is much like a dig­i­tal ver­sion of a fiat coin – it trans­fers val­ue in the course of a finan­cial trans­ac­tion. It notes that DeFi coins are built on and often named for their unique, native blockchain networks.

Right now, it adds, most DeFi pro­to­cols and apps are built on Ethereum. Exam­ples of DeFi coins include Aave, Chain­link, LDO, Uniswap, CRV and Syn­thetix, among dozens of others.

Last week, Luno added three new cryp­to-cur­ren­cies to invest in that are promi­nent in DeFi.

The firm says DeFi has sev­er­al use cas­es, the biggest to date being decen­tralised lend­ing and borrowing.

It points out that col­lat­er­al is used as a safe­guard, much like in tra­di­tion­al finan­cial ser­vices, to ensure lenders will be repaid if a bor­row­er defaults on the loan.

How­ev­er, it explains that trans­ac­tions in DeFi are gen­er­al­ly auto­mat­ed and enforced by smart con­tracts. As a result, they pro­tect both lenders and bor­row­ers before they lose out on money.

Connecting lenders and borrowers

In a state­ment, Luno, which is South Africa’s biggest cryp­to-cur­ren­cy app, says it has added Aave, which con­nects lenders and bor­row­ers direct­ly, with­out the need for intermediaries.

Accord­ing to Luno, Aave is one of the largest cryp­to-cur­ren­cy lend­ing plat­forms, with cur­rent­ly over $6 bil­lion secured across sup­port­ed blockchains.

It also added the Curve DeFi coin, which lets investors trade sta­ble­coins and oth­er cryp­tos for low­er fees. The firm notes Curve has gained pop­u­lar­i­ty as a liq­uid­i­ty provider for sta­ble­coins like USD Coin and USDT.

Last­ly, Luno intro­duced Mak­er­DAO, which allows investors to tem­porar­i­ly lock up their cryp­to in return for Maker’s sta­ble­coin called Dai.

It has attract­ed major investors, includ­ing Andreessen Horowitz, one of the world’s lead­ing ven­ture cap­i­tal firms.

Chris­to de Wit, Luno coun­try man­ag­er for South Africa, explains: “DeFi is an inno­v­a­tive, auto­mat­ed sys­tem that enables finan­cial ser­vices like loans, sav­ings, insur­ance or trad­ing on pub­lic blockchains. By adding these new coins, which are promi­nent in the emerg­ing world of DeFi, cus­tomers can learn more about DeFi, which has the poten­tial to change finance.

“As cryp­to-cur­ren­cies are more than just mon­e­tary coins and form the build­ing blocks of a new decen­tralised dig­i­tal econ­o­my, our cus­tomers are keen for oppor­tu­ni­ties to diver­si­fy their cryp­to port­fo­lios in this inno­v­a­tive space.”

Luno explains that cryp­to-cur­ren­cies reward par­tic­i­pants in decen­tralised ecosys­tems for car­ry­ing out activ­i­ties that keep the sys­tem run­ning smooth­ly and securely.

These decen­tralised ecosys­tems enable and facil­i­tate dif­fer­ent indus­tries, from finan­cial ser­vices to gam­ing. It points out that DeFi is one of the more mature use cas­es for cryp­to technology.

Accord­ing to the firm, the num­ber of glob­al DeFi users was esti­mat­ed at rough­ly 4.8 mil­lion in 2022, and is set to exceed 22 mil­lion users by 2028 at cur­rent growth trends.

The total val­ue locked in DeFi reached more than $52.71 bil­lion last year, Luno states.

Farzam Ehsani, co-founder and CEO of VALR, says the exchange offers over 75 tokens on its plat­form, includ­ing the most pop­u­lar DeFi projects, such as Uniswap, Ondo and Aave, as well as the native tokens of the pro­to­cols or chains on which these DeFi appli­ca­tions are built; for exam­ple, Ethereum, Solana, Avalanche and Sui.

“While VALR itself is a cen­tralised finan­cial plat­form, we form a crit­i­cal bridge between the tra­di­tion­al finance world where fiat cur­ren­cy and cen­tralised inter­me­di­aries are used to move and store val­ue, and the decen­tralised finance world, where cryp­to-cur­ren­cies decen­tralised soft­ware pro­to­cols are used,” Ehsani says.

In time, he adds, VALR has plans to offer ser­vices such as a DeFi wal­let, which users can utilise when inter­act­ing direct­ly with DeFi protocols.

Accord­ing to Ehsani, South Africa is a rel­a­tive­ly advanced and sophis­ti­cat­ed cryp­to mar­ket, with many active par­tic­i­pants in the DeFi ecosys­tem. He points out that sev­er­al DeFi projects were found­ed by South Africans; for exam­ple, Yearn Finance.

“We have seen sig­nif­i­cant uptake of trade in DeFi-relat­ed projects on our plat­form. As a result, we have been list­ing many of the up-and-com­ing and top­i­cal DeFi projects. We’ve list­ed more than 30 new projects in 2024 already. VALR reg­u­lar­ly facil­i­tates trades worth more than R500 mil­lion each day, which shows the lev­el of activ­i­ty in the local mar­ket and this is only growing.”

Hannes Wes­sels, Binance GM of South­ern Africa, believes in the pow­er of DeFi solu­tions to enhance exist­ing finan­cial services. 

“Binance not only offers a plat­form for trad­ing a wide array of DeFi tokens but has also launched its blockchain, known as the BNB Smart Chain (BSC),” says Wessels.

“The BSC is a boon for DeFi devel­op­ers. It offers inter­op­er­abil­i­ty and pro­gram­ma­bil­i­ty, enabling the cre­ation of smart con­tracts for dig­i­tal tokens. With its abil­i­ty to process trans­ac­tions faster and at a low­er cost than many oth­er lead­ing blockchains, BSC has become an attrac­tive plat­form for DeFi projects.” 

How­ev­er, Wes­sels says it’s impor­tant to bear the inher­ent risks of DeFi in mind. “While DeFi holds immense promise, it’s still a rel­a­tive­ly new and rapid­ly evolv­ing space, not yet weath­er-test­ed against all poten­tial mar­ket fluc­tu­a­tions or sys­tem vul­ner­a­bil­i­ties. As such, Binance’s role is not just to enable DeFi plat­forms but also to active­ly invest in safe­ty and secu­ri­ty mea­sures and edu­cate users on poten­tial risks.”

At Ovex, COO Luc Vare­jes says the exchange also offer a range of DeFi tokens.

He explains that these tokens are very dif­fer­ent to Bit­coin as most are gov­er­nance tokens of DeFi protocol’s Decen­tralised Autonomous Organisation.

“This means that hold­ers of the gov­er­nance token will actu­al­ly have a vote in the deci­sions of the pro­to­col. Peo­ple who par­tic­i­pate in the ecosys­tem are reward­ed with these DeFi tokens which hold value.

“We do see some demand for DeFi tokens on our plat­form. How­ev­er, there is quite a big edu­ca­tion gap in South Africa when it comes to the world of DeFi. There are much larg­er edu­ca­tion bar­ri­ers when it comes to DeFi as opposed to stan­dard cen­tralised finance. Most peo­ple do not ful­ly under­stand DeFi pro­to­cols due to their com­plex­i­ty and although adop­tion is grow­ing, there is still a long way to go,” Vare­jes concludes.

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