The Fintech week continues into the next session which is Navigating the New Normal (Emerging technologies). Some panelists will discuss “Web 3.0, the Decentralized Finance.” What does Fintech stand to gain in Web 3.0?
Moderator – General Secretary, Fintech NGR, Help, Legal and Compliance, and Branch, Tolulope Omoleye Oshindero.
Panelist 1 – Managing Partner of Alliance Law Firm, Uche Val Obi, SAN (represented by Albert Audu, Partner at Alliance Firm).
Panelist 2 – Group Head of e-Business in ProvidusBank, Frank Ata.
Panelist 3 – Founder and CEO, Interstellar Inc, Ernest Mbenkum.
Panelist 4 – Director EMTECH, Tunji Odumuboni.
Panelist 5 – Senior Smart Contract Engineer, Equality, Oluchi Enebeli.
Throwing the first question at Ernest Mbenkum, Tolu asked him to give a brief introduction to what DeFi is all about, for the benefit of those who do not know.
Giving answers to the question, Ernest Mbenkum said,
“DeFi is this new emerging technology that is in a way challenging the centralized system of traditional finance. It is built around blockchain and uses technology like Smart Contract and other technological cryptographic method to make financial services faster and more secure.”
“It also lowers the barrier to entry that are traditionally linked with centralized finance. The technology tends to be botherless. At this point, it is almost early, even though it’s thirteen years old. It continues to challenge traditional systems and regulators who are still trying to understand how this can be applied without disrupting existing systems.”
“Most of the solution around this happens to be peer-to-peer, non-custodial, and also mass market and within Africa where we face unique challenges with financial inclusion. This technology DeFi is seen as one of the pillars that could increase financial inclusion and address many of the challenges we face within Africa. But the technology is still new, and we are excited that with Africa, there is a lot of promise with the government beginning to deep their toes in these technologies with various solutions including the e-Naira.”
How DeFi is been Used in Nigeria and Africa
In terms of clear examples of how DeFi is being used in Nigeria and Africa as a whole, Mbenkum explained that,
“There are a lot of used cases in Africa, especially in Nigeria which is kind of leading the space in innovation. However, many of these services are not yet regulated so they have a unique challenge in basically growing or getting acceptance with the traditional regulated framework.”
Speaking further, she said, “However, what we are doing at Interstellar is that we are working closely with the leading payment companies within Nigeria specifically Interswitch. We are working with system spec Remitta and we are collaborating with the Central Bank on the e-Naira project. We are also working with major institutions like the African Fintech Foundry, Access Bank, Sterling bank, and others to begin to explore how could create a hybrid toward DeFi. This is because it is a journey and you have to be careful when you are working with new and innovative technologies.”
She concluded that, “However, there are other players in Nigeria like Appzone, organizations like a butcher, and the rest that are taking a deep dive into this technology and creating solutions that can be used for cross-border services, digital payment even solutions around the real estate where you can tokenize real estate. You can make fractional real estate where people don’t have to buy a complete plot of land, and where people don’t have to be scared of fraud. Some projects are been undertaken by some institutions right now within Nigeria that is helping to address some of these challenges that we face.”
Why DeFi? What does Fintech stand to gain in Web 3.0?
Speaking on how DeFi works, Senior Smart Contract Engineer, Equality, Oluchi Enebeli, said,
“Based on the technology that DeFi brings, about decentralization, more innovative solutions around finance, decentralized lending, decentralized borrowing, and so on. Over time, the rate of DeFi adoption has also increased in Nigeria and Africa.”
“The reason why DeFi is adopted is because of the rate it presents and the structure in which it operates. There is also a little barrier to entry and less regulation. This means you can get up to the speed you want with DeFi, you can only onboard into various platforms on DeFi.”
She concluded by saying, “It also boasts little KYC and you can access financial solutions like almost immediately (lending, borrowing, leveraging on your bitcoin).”
Speaking on how DeFi Lending Works, Enebeli, further explained that,
“If you have some form of cryptocurrency, and you do not want to sell it, you could use those tokens as collateral and get more stable coins to use for your day-to-day activities. The good news is that you do not have to fill out long forms or documents to access these loans. When lending, you can decide the rate you want from them, unlike traditional lending.”
What Can be said of all the DeFi Process in Fintech
Speaking on this, Group Head of e-Business in ProvidusBank, Frank Atat, said,
“DeFi and centralized systems are two different things and they are interchangeable. In terms of regulation, they have not been defined to allow participants to participate the way they want.”
Although DeFi is seamless and removes the bottleneck, it has its bottleneck. Centralization has its possibilities and it comes to play when it comes to people’s money. The system might feel unstructured, but people still feel insecure about leaving their money and things happening in space as they should.”
“In Nigeria, it is not fully structured, but well structured, but outside the country, it seems to be a perfect system that answers a lot of concerns around dependency, bottlenecks, and the likes.”
“DeFi might address a lot of issues around onboarding, inclusion, and removing friction from onboarding, but on its own, the centralized system will also have its say. We need to separate what is appropriate, critical, and important in terms of financial services. It is important we separate them and put them in a different buckets.”
In his concluding words, Atat said,
“What all this entails is passing across simplicity to all we desire as a constituency, and what those things will deliver. Henceforth, DeFi will have a say in how a lot of systems are designed. We should also look at what is important to the ecosystem and how it can benefit all.”
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