2023’s top 5 DeFi protocols by Revenue, As Stablecoins Set to Outshine Visa in 2024

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December 26, 2023

Decentralized finance (DeFi) has been one of the most exciting and innovative sectors in the crypto space in the past few years. DeFi protocols aim to provide various financial services such as lending, borrowing, trading, investing, and more, without relying on intermediaries or centralized authorities.

By leveraging smart contracts, blockchain technology, and decentralized governance, DeFi protocols offer users more control, transparency, efficiency, and access to financial opportunities.

We will look at the top 5 DeFi protocols by revenue in 2023, based on the data from defipulse.com. Revenue is defined as the total fees generated by the protocol from its users, excluding any subsidies or incentives. Revenue is a good indicator of the value proposition, adoption, and sustainability of a DeFi protocol.

Here are the top 5 DeFi protocols by revenue in 2023:

Uniswap: $1.2 billion

Uniswap is the leading decentralized exchange (DEX) on Ethereum, allowing users to swap any ERC-20 tokens without intermediaries or order books. Uniswap also enables users to provide liquidity to various pools and earn fees from each trade.

Uniswap has been the most popular and widely used DeFi protocol since its launch in 2018 and has maintained its dominance in 2023 with a 32% market share of the DEX sector. Uniswap’s revenue comes from a 0.3% fee that is charged on every swap and distributed to the liquidity providers.

Aave: $800 million

Aave is a decentralized lending and borrowing platform that supports a variety of assets, including stablecoins, cryptocurrencies, and interest-bearing tokens. Aave allows users to borrow funds at variable or fixed interest rates, as well as to lend their idle assets and earn passive income.

Aave also offers innovative features such as flash loans, credit delegation, and liquidity mining. Aave’s revenue comes from a 0.25% origination fee that is charged on every loan and a 0.09% flash loan fee.

Compound: $600 million

Compound is another decentralized lending and borrowing platform that operates on Ethereum. Compound differs from Aave in that it uses a compound interest rate model that adjusts the supply and demand of each asset in real time.

Compound also issues its own governance token, COMP, which allows holders to propose and vote on protocol changes. Compound’s revenue comes from a 0.05% origination fee that is charged on every loan.

Maker: $400 million

Maker is a decentralized credit platform that enables users to generate Dai, a stablecoin pegged to the US dollar, by locking up collateral such as ETH, WBTC, or other tokens. Dai can then be used for various purposes such as trading, lending, or paying for goods and services.

Maker also maintains the stability of Dai through a system of collateralized debt positions (CDPs), interest rates (stability fees), and automated feedback mechanisms (liquidations and auctions). Maker’s revenue comes from the stability fees that are paid by CDP users when they repay their Dai.

Curve: $300 million

Curve is a specialized DEX that focuses on stablecoins and low-volatility assets. Curve offers low slippage, high liquidity, and low fees for swapping between similar assets, such as USDC, USDT, DAI, sUSD, etc.

Curve also allows users to provide liquidity to various pools and earn fees and rewards from both the protocol and third-party platforms such as Yearn, Synthetix, or SushiSwap. Curve’s revenue comes from a 0.04% fee that is charged on every swap and distributed to the liquidity providers.

Stablecoins set to outshine Visa in settlements by 2024 With a $137B market surge

Stablecoins are digital currencies that are pegged to a fiat currency or a basket of assets. They aim to provide the benefits of cryptocurrencies, such as fast and cheap transactions, without the volatility and risk of price fluctuations. Stablecoins have been gaining popularity and adoption in recent years, especially as a means of cross-border payments and remittances.

One of the main advantages of stablecoins is that they can offer faster and cheaper settlements than traditional payment systems, such as Visa. Visa is one of the largest payment networks in the world, processing over $11 trillion worth of transactions in 2020.

However, Visa also charges fees for each transaction, which can vary depending on the region, currency, and type of card. Moreover, Visa transactions can take up to three days to clear and settle, depending on the intermediary banks involved.

Stablecoins, on the other hand, can settle transactions in minutes or even seconds, using blockchain technology and smart contracts. They also have lower fees than Visa, as they do not rely on intermediaries or third parties.

According to a recent report by Juniper Research, stablecoins are expected to surpass Visa in terms of the value of settlements by 2024, reaching $1.7 trillion, compared to Visa’s $1.5 trillion. This would represent a massive increase from the current value of stablecoin settlements, which is estimated at $540 billion in 2020.

The report also predicts that the market capitalization of stablecoins will grow from $35 billion in 2020 to $172 billion in 2024, driven by the increasing demand for digital payments and the growing adoption of stablecoins by various sectors and regions. Some of the factors that could boost the growth of stablecoins include:

The emergence of central bank digital currencies (CBDCs), which are digital versions of national currencies issued by central banks. CBDCs could increase the trust and legitimacy of stablecoins, as well as provide interoperability and compatibility between different platforms and systems.

The development of decentralized finance (DeFi), which is a movement that aims to create financial services and products that are accessible, transparent, and permissionless, using blockchain technology and smart contracts. DeFi could offer new use cases and opportunities for stablecoins, such as lending, borrowing, trading, investing, and saving.

The expansion of stablecoin offerings and innovations, which could cater to different needs and preferences of users and customers. For example, some stablecoins could offer more stability and security, while others could offer more flexibility and scalability. Some stablecoins could also incorporate features such as governance, rewards, or privacy.

Stablecoins are set to outshine Visa in settlements by 2024 with a $137 billion market surge in four years. This could have significant implications for the future of payments and finance, as well as for the adoption and innovation of cryptocurrencies and blockchain technology.

Nigeria Printed More Than It Owed in Dollars

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Paul Ugbede Godwin

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December 26, 2023

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Nigeria is facing a severe currency crisis, as the naira has lost more than 50% of its value against the US dollar in the past year. The main cause of this crisis is the government’s decision to print more money than it had in foreign reserves, in order to finance its budget deficit and pay off its debts.

The Nigerian government has been running a fiscal deficit since 2015, when the global oil price collapsed and reduced its main source of revenue. The government borrowed heavily from domestic and foreign sources, accumulating a public debt of over 35% of GDP by 2020. However, as the COVID-19 pandemic hit the economy and reduced its tax revenues, the government faced a liquidity crunch and struggled to service its debt obligations.

How Printing Money Led to Hyperinflation

To avoid defaulting on its debt, the government resorted to printing more naira, which it used to pay its creditors and fund its spending. According to the Central Bank of Nigeria (CBN), the government’s overdraft facility increased from 2.4 trillion naira ($6 billion) in 2019 to 10 trillion naira ($24.5 billion) in 2020, equivalent to 12% of GDP. This was more than the total amount of dollars that the CBN had in its foreign reserves, which stood at $35.4 billion at the end of 2020.

The consequence of printing more money than it had in foreign reserves was that the naira became overvalued and unsustainable. The CBN tried to maintain a fixed exchange rate of 380 naira per dollar, but this created a huge gap between the official rate and the parallel market rate, which reached over 500 naira per dollar in December 2020.

The CBN also imposed strict capital controls and rationed foreign exchange to importers and investors, creating a shortage of dollars in the economy and hampering trade and investment.

The excess supply of naira and the scarcity of dollars led to a rapid depreciation of the naira and a surge in inflation. The annual inflation rate rose from 11.4% in December 2019 to 18.1% in April 2021, the highest level since 2017.

The food inflation rate was even higher, at 22.7%, reflecting the impact of currency devaluation on import costs and domestic food production. The rising inflation eroded the purchasing power of Nigerians, especially the poor and vulnerable, who spend a large share of their income on food.

The currency crisis has also had negative effects on economic growth and development. The GDP contracted by 1.8% in 2020, the second recession in five years. The unemployment rate rose to 33.3% in the fourth quarter of 2020, the highest level on record. The poverty rate increased from 40% in 2019 to 45% in 2020, meaning that over 100 million Nigerians are living below the poverty line of $1.90 per day.

The way out of this crisis is for the government to stop printing money and adopt a credible fiscal and monetary policy framework that can restore macroeconomic stability and confidence. The government needs to reduce its fiscal deficit by increasing its revenue base and rationalizing its expenditure.

The CBN needs to allow the exchange rate to reflect market forces and eliminate the multiple exchange rate regime. The CBN also needs to tighten its monetary policy stance and reduce its lending to the government, which fuels inflation and crowds out private sector credit.

By taking these steps, Nigeria can avoid a hyperinflationary scenario that would further impoverish its people and undermine its economic prospects. Nigeria has the potential to become a prosperous and diversified economy, but it needs to address its currency crisis before it becomes too late.

Bloody Christmas in Plateau: Obi, Others Decry Escalating Violence in Nigeria

By

Samuel Nwite

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December 26, 2023

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The echoes of a grim Christmas resonate across Nigeria as the nation grapples with appalling violence, particularly in Plateau, Katsina, and Zamfara states – resulting in a cold bloodbath.

The recent onslaught of attacks, characterized as pure acts of terrorism and gruesome murders by Plateau State Governor Caleb Mutfwang, has drawn widespread condemnation, including from prominent figures like the Labour Party’s 2023 presidential candidate, Peter Obi.

The resultant toll includes a distressing number of casualties, with hundreds displaced from their communities. In Plateau State alone, more than 150 people have been confirmed dead in 15 communities, with about 300 others injured.

Obi, expressing profound dismay, decried the escalating insecurity and bloodshed, likening the situation in Nigeria to countries embroiled in declared wars. He highlighted the dire circumstances faced by the country during the Christmas break, specifically addressing the harrowing incidents in Plateau, Zamfara, Kaduna, and other regions often overlooked in media coverage.

“After my sympathy visit to the Regent of Oba Community in Anambra State for the recent horrific killing of people in a nightclub in that community; plus the mindless act of terrorism that occurred on Christmas Day in Plateau State, where the death toll is now reportedly more than 100 with over 300 injured; with the saddening acts of violence that have occurred in Zamfara and Katsina States, where farmers were killed and several others kidnapped, and the many other violent attacks in many parts of the country, which may go unreported; my thoughts went to our overstretched security operatives,” Obi said in a series of poignant messages shared on social media.

“And to all the families who have lost their loved ones to these acts of violence, do accept my sincere condolences. These are very challenging times in our nation.

“Even some countries in open declared wars have not experienced this level of insecurity, violence and loss of human lives,” he added.

Governor Mutfwang, while addressing the horrifying attacks in Plateau State during an interview with ARISE NEWS, said that these brutal actions were not rooted in religious or farmer-herder conflicts. Instead, he categorized them as sheer criminality and terrorism, perpetuated on the eve of a revered day of remembrance.

“But I must say that this recent action has nothing to do with farmers-herders clash, has nothing to do with religion, this is pure criminality, this is pure terrorism… It’s quite unfortunate, but we will continue these engagements and also explore other ways by which we can be able to bring the situation under control,” Muftang said.

The governor highlighted the multifaceted approach taken by the state government, involving both kinetic and non-kinetic strategies, including community engagements aimed at unraveling the underlying causes of the recurrent crisis. Despite these efforts, the recent onslaught of violence staggered the region, leaving devastation and displacement in its wake.

The collective sentiment among Nigerian leaders and citizens alike echoes the need for urgent and decisive action to stem the tide of violence. The nation finds itself at a critical juncture, grappling with the erosion of security and stability across multiple regions.

In the wake of these senseless killings, calls for unity, resilience, and prayers for a nation besieged by unprecedented insecurity reverberate.

Following these attacks, Nigerians have reminded President Bola Tinubu, whose campaign promises included security for the whole country, of the urgent need for cohesive strategies to restore peace, protect lives, and heal a nation torn asunder by violence.

However, the question that lingers amid the grief and turmoil is whether the present government is ready to step on toes to stem the tide of violence and pave the way toward a future where peace and security prevail.

The president has yet to comment on the bloodbath as of the time of filing this report.

FCCPC Announces New Regulatory Framework to Help Loan Apps Recover Debts

By

Samuel Nwite

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December 26, 2023

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Federal Competition and Consumer Protection Commission (FCCPC) gears up to address challenges posed by digital money lenders, unveiling plans for 2024 regulations.

In a bid to confront the mounting issue of Nigerians’ indebtedness to digital money lenders (DMLs), commonly known as loan apps, the Federal Competition and Consumer Protection Commission (FCCPC) has declared its intention to devise a robust regulatory framework.

This revelation was made by Mr. Babatunde Irukera, the Chief Executive Officer of the Commission, during a recent appearance on a live TVC program on Monday.

Irukera highlighted the pressing concern surrounding the burgeoning indebtedness to DMLs, identifying it as a significant industry challenge that demands immediate attention. Earlier interventions by the FCCPC to curtail predatory lending practices utilized by some loan sharks resulted in a shift in their debt recovery strategies, prompting a considerable number of loan apps to modify their approaches.

While these interventions successfully reduced the prevalence of abuse and harassment by loan apps, Irukera pointed out that default rates among borrowers continued to soar. He warned about the potential collapse of digital lenders critical to the economy if this trend persists.

Addressing Default and Ethical Recovery Measures

Emphasizing the need to shift away from unethical loan recovery mechanisms, Irukera said: “One of the big issues that we’re seeing is that there’s now a significant level of loan default because people are not able to use these unethical and inappropriate loan recovery mechanisms and I’m insistent that you cannot say to me that the only language Nigerians understand is to abuse them. No, I disagree.

“We must necessarily do the work no matter how hard it is to find a more sensible way to recover loans because I also agree that if these digital money lenders are unable to recover their loans and drop out of the market, it’s a consumer protection problem because of those who need those types of short-term unsecured lending.”

He advocated for a balanced approach to responsible borrowing and lending, hinting at upcoming regulations in 2024 aimed at fostering fiscal responsibility among individuals and corporations.

“So, we have to find the balance and so some of the regulations that will come out in 2024 will be a broader approach to responsible borrowing and responsible lending by individuals and corporate,” he said.

Highlighting the significance of a centralized credit system, Irukera proposed extending reporting capabilities to various entities, such as school landlords, to contribute to assessing an individual’s creditworthiness. He suggested that limiting access to credit based on one’s fiscal responsibility could incentivize self-regulation among borrowers and enhance loan recovery.

“I’m hopeful that the future of what we’re building is that even school landlords would be able to report to a centralized credit system about the conduct of tenants, students, and parents so that we can know each person’s level of fiscal responsibility or credit wordiness,” he added.

Progress and Ongoing Efforts

Under the interim regulatory framework, the FCCPC has made substantial strides, witnessing an 80% reduction in harassment and defamatory practices by loan apps. However, acknowledging the remaining 20%, Irukera affirmed that efforts are underway to address these challenges.

The Commission has taken steps to register over 200 loan apps, a move aimed at sanitizing the digital lending market and eradicating unethical practices such as defamation and harassment of borrowers. As of the latest update, the FCCPC has approved a total of 211 digital lenders, illustrating its commitment to streamlining the sector.

Addressing the regulatory challenges of emerging industries

Irukera noted the evolving nature of the interim regulatory framework, citing the emergence of fintech not just in Nigeria but globally. He stressed the importance of learning from industry operations and dynamics to develop an optimal regulatory ecosystem.

The CEO expressed optimism regarding the upcoming 2024 regulations, foreseeing their emergence as a pivotal moment in reshaping the lending industry. These regulations aim not only to protect consumers but also to foster responsible borrowing practices and ensure the sustained operation of digital money lenders integral to the country’s financial sector.

Fuel Subsidy Removal: World Bank Boosts Nigeria’s Palliatives with $315 Million

By

Samuel Nwite

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December 26, 2023

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In an effort to cushion the impact of the fuel subsidy removal, the World Bank has escalated its financial support to Nigeria, increasing its disbursement from $300 million to $315 million. The funds, part of an $800 million allocation for the National Social Safety-Net Program Scale Up (NSSP-SU), have been specifically directed to alleviate the economic strains faced by the most vulnerable sectors of society.

This development was disclosed in the Implementation Status & Results Report for the project, which highlighted that while $315 million has been disbursed, a remaining balance of $428.31 million is yet to be allocated. Out of the $800 million, $600 million is earmarked for the Economic Shock Responsive Cash Transfer (ESR-CT), $147 million for the Extended Regular Cash Transfer (ER-CT), and $53 million for strengthening the delivery system and project management.

According to the World Bank document, the Federal Government initially aimed to assist five million beneficiaries by mid-December. However, only about 1.5 million households have received cash transfers, a mere 0.1% of the intended target of 15 million households. Moreover, there has been a modification in the cash transfer scheme, with the monthly support revised from an initial N5,000 to N25,000 over three months, as communicated by the Federal Ministry of Humanitarian Affairs and Poverty Alleviation.

The modification aligns with efforts to intensify support for those affected by the removal of the fuel subsidy. The document states partly, “The Federal Ministry of Finance has approved the commencement of disbursements and project implementation. Since then, the project has made an initial drawdown of USD 315 million, and commenced initial cash transfers to poor and vulnerable households, with about 1.5 million households already receiving transfers in their accounts.”

It has been revealed that project-implemented units are collaborating with the Central Bank of Nigeria (CBN) and the National Identity Management Commission (NIMC) to streamline beneficiary enrolment, issuing Bank Verification Numbers (BVNs) and National Identity Numbers (NINs) for account operations. This move aligns with the CBN’s directive that all bank accounts without BVN and NIN will be placed on “Post no Debit” from April 2024, with a mandate for revalidation by January 31, 2024.

The National Social Safety Net Programme-Scale Up, sanctioned by the World Bank in December 2021 and scheduled to continue until June 30, 2024, is spearheaded by the Federal Ministry of Humanitarian Affairs & Poverty Alleviation. The $800 million initiative aims to execute a monthly cash transfer program for impoverished Nigerians affected by recent policy changes, including the fuel subsidy removal.

In a separate event in October 2023, President Bola Tinubu formally launched a conditional cash transfer program set to benefit 15 million households nationwide, providing N75,000 within three months. This initiative adds to the ongoing efforts to mitigate the economic repercussions of policy adjustments.

While the increased disbursement signifies progress in aiding vulnerable populations, criticisms have emerged regarding the pace and transparency of the implementation, with only a fraction of the intended beneficiaries currently receiving support. Critics argue that the pace needs acceleration and a comprehensive database should be established to effectively address the widespread economic challenges exacerbated by the fuel subsidy removal.