Some crypto companies are fully compliant, fully regulated, and still can't keep their bank accounts. Learn why the financial system is quietly freezing them out.
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Why can't a fully compliant, regulated crypto business secure a bank account in 2025?
If you're operating in this space, you already know the answer. You've lived through it. You've submitted the documentation, walked through your AML procedures, and demonstrated your regulatory compliance… only to be rejected. Or worse still, waking up to find your existing account frozen, with no real explanation and no path forward.
This isn't about isolated cases or bad actors being weeded out. It's a pattern of systematic risk aversion that's creating real barriers to growth across the entire sector, and it's throttling one of the most significant financial innovations of our generation.
We're Tap, and we're building the infrastructure that traditional banks refuse to provide.
The Economics Behind the Blockade
Let's examine what's actually driving this exclusion, because it's rarely about the reasons banks cite publicly.
The European Banking Authority has explicitly warned against unwarranted de-risking, noting it causes "severe consequences" and financial exclusion of legitimate customers. Yet the practice continues, driven by two fundamental economic pressures that have nothing to do with your business's actual risk profile.
The compliance cost calculation
Financial crime compliance across EMEA costs organizations approximately $85 billion annually. For traditional banks, the math is simple: serving crypto businesses requires specialized expertise, enhanced monitoring, and ongoing due diligence. As a result, it's cheaper to reject the entire sector than to build the infrastructure needed to serve it properly.
The regulatory capital burden
New EU regulations impose a 1,250% risk weight on unbacked crypto assets such as Bitcoin and Ethereum. This isn't a compliance requirement; it's a capital penalty that makes crypto exposure commercially unviable for traditional institutions, regardless of the actual risk individual clients present.
In the UK, approximately 90% of crypto firm registration applications have been rejected or withdrawn, often citing inadequate AML controls. Whether those assessments are accurate or not, they've created the perfect justification for blanket rejection policies.
The result? Compliant businesses are being treated the same as bad actors; not because of what they've done, but because of the sector they're in.
The Real Cost of Financial Exclusion
Financial exclusion isn’t just an hiccup; it creates tangible operational barriers that ripple through every part of running a crypto business.
Firms that have secured MiCA authorization, built robust compliance programs, and met regulatory requirements can find themselves locked out of basic banking services. Essential fiat on-ramps and off-ramps remain inaccessible, slowing payments, limiting growth, and complicating cash flow management.
Individual cases illustrate the problem vividly as well. Accounts are closed because a business receives a payment from a regulated exchange. Others are dropped with vague references to “commercial decisions,” offering no substantive justification. Founders frequently struggle to separate personal and business finances, as both are considered too risky to serve.
The irony is striking. By refusing service to compliant businesses, traditional banks aren’t mitigating risk; they’re amplifying it. Forced to operate through less regulated channels, these legitimate firms face higher operational and compliance risks, slower transactions, and reduced investor confidence. Over time, this slows innovation, and raises the cost of doing business for firms that are legally and technically sound.
Debanking Beyond Europe: U.S. Crypto Firms Face Their Own Challenges
Limited access to banking services isn’t exclusive to Europe. Leading firms in the U.S. crypto industry have faced numerous challenges regarding the banking blockade. Alex Konanykhin, CEO of Unicoin, described repeated account closures by major banks such as Citi, JPMorgan, and Wells Fargo, noting that access was cut off without explanation. Unicoin’s experience echoes a broader sentiment among crypto executives who argue that traditional financial institutions remain wary of digital asset businesses despite recent policy shifts toward a more pro-innovation stance.
Jesse Powell, co-founder of Kraken, has also spoken out about being dropped by long-time banking partners, calling the practice “financial censorship in disguise.” Caitlin Long, founder of Custodia Bank, recounted how her institution was repeatedly denied services. Gemini founders Tyler Winklevoss and Cameron Winklevoss shared similar frustrations.
These experiences reveal a pattern many in the industry interpret as systemic risk aversion. Even in a market as large and mature as the United States, crypto-focused businesses continue to encounter obstacles in maintaining basic financial infrastructure. The issue became especially acute after the collapse of crypto-friendly banks such as Silvergate, Signature, and Moonstone; institutions that once served as key bridges between fiat and digital assets. Their exit left a gap few traditional players have been willing to fill.
Why Tap Exists
The crypto industry has reached an inflection point. Regulatory frameworks like MiCA are providing clarity. Institutional adoption is accelerating. The technology is proven and tested. But the fundamental infrastructure gap remains: access to business banking that actually works for digital asset businesses.
This is precisely why we built Tap for Business.
We provide business accounts with dedicated EUR and GBP IBANs specifically designed for crypto companies and businesses that interact with digital assets. This isn't a side offering or an experiment, it's our core focus.
Our approach is straightforward
We built our infrastructure for this sector
Rather than retrofitting traditional banking systems to reluctantly accommodate crypto businesses, we designed our compliance, monitoring, and operational frameworks specifically for digital asset flows. This means we can properly assess and serve businesses that others automatically reject.
We price in the actual risk, not the sector
Blanket rejection policies exist because they're cheap and simple. We take a different approach: evaluating each business based on their actual controls, compliance posture, and operational reality. It costs more, but it's the only way to serve this market properly.
We're committed to sector normalization
Every time a legitimate crypto business is forced to operate without proper banking infrastructure, it reinforces outdated stigmas. By providing professional financial services to compliant businesses, we're helping demonstrate what should be obvious: crypto companies can and should be served by the financial system.
It isn't about taking on risks that others won't. It's about properly evaluating risks that others refuse to understand.
Moving Forward
The industry is maturing. Regulatory clarity is emerging. Institutional adoption is accelerating. But you can't put your business on hold while traditional banks slowly catch up to reality.
That's not sustainable in the long run.
As a firm, you shouldn't have to beg for a bank account. You shouldn't have to downplay your crypto operations just to access basic financial services. And you certainly shouldn't have to accept that systematic exclusion with little to no explanation other than “It’s just how things are."
The crypto sector is building the future of finance. Your banking partner should believe in that future too. If you're ready to work with financial infrastructure built for your business, not in spite of it, here we are.
Talk today with one of our experts to understand how we can help your business access the banking infrastructure you need.
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The Curve protocol and Curve DAO token form another innovative project to come from the DeFi movement and one that provides a particularly unique and well-designed concept. Improving on functionalities that DeFi platforms like Uniswap and Sushiswap have otherwise neglected, Curve focuses on providing a viable alternative solution to traditional financial platforms in the blockchain industry.
The Curve Finance platform, launched in January 2020, later released a decentralised autonomous organisation (DAO) alongside the Curve DAO token eight months later. CRV functions as the in-house token of the platform.
What Is Curve DAO (CRV)?
The Curve platform, formally known as Curve Finance, provides traders with a decentralised exchange on which to swap digital assets. Curve aims to provide minimum price slippage between two tradable crypto assets by focusing on stablecoins or assets of similar value. Through an automated market maker (AMM) and focused smart contracts, the decentralised exchange is able to manage liquidity.
While the platform can be compared to Uniswap, in reality, it has some key differences and a much higher amount of locked liquidity. The platform and its liquidity providers are more focused on stablecoins and other coins of that nature. CRV tokens fuel the network and are a tradable asset for crypto users.
The Curve DAO provides more decentralised governance to Curve's trading platform. The Curve protocol has grown into a well-respected financial asset within the DeFi ecosystem with its strong DeFi protocol.
Who created the Curve protocol?
The Curve platform was created by a Russian scientist with ample experience in the crypto industry. Michael Egorov both founded the platform and acts as its CEO. He previously co-founded a crypto business focused on building privacy-oriented protocols and infrastructure, NuCypher, in 2015, as well as LoanCoin, a decentralised bank and loans network.
As of August 2020, Egorov holds 71% of the governance tokens after locking up a large amount of CRV tokens in response to yearn.finance’s increasing voting power in the Curve network. In a statement made later, Egorov admitted to “overreacting”.
How does Curve work?
Launched prior to Uniswap V2, Curve Finance operates similarly to the DeFi platform but has implemented some key differences. The decentralised exchange differentiates itself from the original AMM platform by innovating the liquidity pool trading structure and relevant smart contracts.
The Curve DAO trading platform is managed by a mathematical function called a bonding curve, which is designed to let cryptocurrencies trade for the best possible price amongst each other. Bonding curves are also used by other DeFi trading platforms, like Uniswap.
Due to the Curve DAO platform being primarily focused on stablecoins, its bonding curve is specifically focused on these pegged digital currencies and is able to trade a larger amount of stablecoins with less change in their relative prices in a liquidity pool.
Lending pools
In order for the Curve DAO platform to operate, it requires a group of users who are willing to lock up their cryptocurrencies in order for them to be traded by others. The platform provides a return on their coins plus a portion of the fees from trades when incentivizing liquidity providers.
The platform manages the coins in the liquidity pools by making them more expensive or cheaper, based on their fluctuating amounts, thereby making them more attractive to buyers and sellers using the platform.
On Uniswap, liquidity pools are based strictly on predetermined trading pairs while on Curve DAO the liquidity pools comprise multiple assets. On Curve DAO, entire liquidity pools can also be used as an asset inside another liquidity pool.
How does a trader use the liquidity pools?
Once a trader adds liquidity to a specific pool, through stablecoins or other digital assets, the user will receive a token specific to that pool. 3pool is an example of one of the most popular liquidity pools on the Curve platform.
While the platform is known to provide trading for stablecoins, it also supports mirrored assets such as renBTC and wBTC. These assets are both built on the Ethereum blockchain and track the price of Bitcoin in a typical derivatives fashion. Since the prices are close in value they can function in the same pool and be traded using the Curve DEX.
What is the Curve DAO token (CRV)?
The CRV token is the utility token and governance token of the Curve DAO platform, providing users with governance rights, an incentive structure for fee payments, as well as providing long-term rewards to liquidity providers. CRV tokens are awarded to users based on their liquidity commitment and length of ownership.
The Curve DAO token was launched alongside the Curve DAO in August 2020. The maximum supply is 3.03 billion CRV tokens, with 62% of that being distributed to liquidity providers. The rest is allocated between employees (3%), and shareholders (30%), and a small percentage is kept for community reserves (5%). Employee and shareholder allocations work off of a two-year vesting schedule.
At the time of writing, over 531 million CRV tokens are in circulation, roughly 16% of the total supply. The market cap at the time was around $365 million, positioning the Curve DAO token network in the top 20 biggest platforms in the DeFi ecosystem.
How can I buy Curve DAO tokens?
If you’d like to buy Curve DAO tokens to include in your crypto portfolio, you can do so easily through the Tap mobile app. Providing a highly secure and equally simple crypto trading platform, users can buy CRV with British Pounds or Euros, or exchange tokens for other cryptocurrencies supported on the platform such as Bitcoin or Ethereum.
Simply download the app, create an account and follow the steps to get verified through the KYC process. You will then have access to several wallets, and a much simpler crypto trading experience.
Kryptobranschen kan ibland kännas som ett eget språk – men vi hjälper dig att reda ut vad tickers egentligen handlar om. Tickers introducerades redan på 1800-talet för att förenkla aktiehandel, genom att visa en förkortning av företagsnamnet istället för hela namnet. Samma princip används idag inom krypto. Här guidar vi dig genom hur du undviker förvirring kring kryptotickers.
Vad är en kryptoticker?
En kryptoticker är en förkortning som representerar en viss kryptovaluta på centraliserade och decentraliserade börser. Till exempel står BTC för Bitcoin och ETH för Ethereum.
Kan två kryptovalutor ha samma ticker?
Nej, eftersom flera kryptovalutor ofta listas och handlas på samma börs behöver varje enskild valuta en unik ticker. Ibland händer det dock att mindre projekt kopierar en känd ticker för att få uppmärksamhet – detta är ofta ett varningstecken på att något inte står rätt till.
För att förenkla det hela har vi delat upp tickers i olika kategorier: betalningsvalutor, stablecoins, meme-mynt, utvecklingsfokuserade plattformar och ett spelprojekt.
Betalningsfokuserade kryptovalutor
Sedan Bitcoin lanserades 2009 har många projekt försökt skapa förbättrade versioner av digitala pengar. Flera har till och med använt namnet "Bitcoin" i sina egna projekt – vilket lett till viss förvirring.
BTC – Bitcoin
Det första och största kryptovalutan. Bitcoin är fortfarande den mest spridda digitala valutan.
LTC – Litecoin
En lyckad "fork" av Bitcoin med snabbare och billigare transaktioner.
XRP – Ripple
En valuta som fokuserar på snabba och billiga gränsöverskridande transaktioner.
Stablecoins
Stablecoins är kopplade till traditionella fiatvalutor för att undvika den prisvolatilitet som krypto är känt för. Dessa används ofta inom DeFi-projekt.
USDC – USD Coin
Kopplad till amerikanska dollarn. Lanserades av Circle och Coinbase 2018.
USDT – Tether
Världens första stablecoin, lanserad 2014. Även denna är kopplad till USD.
Meme Coins
Sedan Dogecoin blev en snackis har många försökt rida på vågen – oftast med låg marknadsvärdering. Här fokuserar vi på de två största:
DOGE – Dogecoin
Det första meme-myntet, lanserat 2013 som en "fork" av Litecoin.
SHIB – Shiba Inu
Lanserad 2020 som ett bredare ekosystem jämfört med Dogecoin, med fler funktioner.
Utvecklingsfokuserade kryptovalutor
Flera projekt har följt i Ethereums fotspår genom att erbjuda plattformar för utveckling av dApps och smarta kontrakt. Här är några av de mest populära:
ETH – Ethereum
Den mest använda utvecklingsplattformen, lanserad 2015. Känd för sina smarta kontrakt och breda användningsområden.
ADA – Cardano
Grundad av en av Ethereums medskapare. Fokuserar på akademisk forskning och hållbar utveckling.
DOT – Polkadot
Möjliggör kommunikation mellan olika blockkedjor – s.k. interoperabilitet.
LINK – Chainlink
En orakellösning som kopplar smarta kontrakt till externa datakällor.
SOL – Solana
En snabb och billig plattform för dApps och smarta kontrakt. Ett alternativ till Ethereum.
Spelplattform
MANA – Decentraland
Decentralands inhemska valuta. Används i det virtuella speluniversumet och kan även handlas på externa börser.
Sammanfattning: Så undviker du tickerförvirring
Vi hoppas att den här guiden hjälper dig att känna dig mer hemma bland kryptotickers – särskilt om du är i startgroparna för din resa inom digitala tillgångar.
För dig som vill köpa, sälja eller lagra kryptovalutor på ett enkelt och säkert sätt erbjuder Tap en användarvänlig lösning. Alla valutor i appen visas med aktuell kurs, så att du kan ta kontroll över din kryptoupplevelse direkt från mobilen.
I en rad nya kryptotillgångar som nu stöds i Tap-appen är Chainlink en av de senaste att listas. Plattformen har gjort sig känd som en av de största inom oracles – en teknik som möjliggör kommunikation mellan verklig data och blockchain-applikationer.
Men vad är Chainlink egentligen – och varför ska du bry dig i en värld där det redan finns många andra decentraliserade lösningar? Det handlar om att Chainlink löser ett avgörande problem som länge begränsat användningen av smarta kontrakt i verkliga affärssituationer.
Vad är Chainlink (LIN)?
Chainlink är ett decentraliserat oracle-nätverk som fungerar som en bro mellan verklig data och blockkedjeteknik. Målet? Att smarta kontrakt ska kunna använda verkliga data – som väder, valutakurser eller sportresultat – för att fungera automatiskt.
Smarta kontrakt är digitala avtal som automatiskt genomförs när vissa villkor är uppfyllda. Problemet? De kan inte "se" vad som händer utanför blockkedjan. Chainlink löser detta genom sitt nätverk av oracles – dataleverantörer som hämtar in information från verkliga källor och matar in den i blockkedjebaserade applikationer.
Dessa oracles belönas med Chainlinks egna token, LINK, och rankas utifrån pålitlighet och korrekt data, vilket gör systemet både smart och säkert.
Vem grundade Chainlink?
Chainlink har sitt ursprung i ett projekt från 2014 kallat SmartContract, grundat av Sergey Nazarov och Steve Ellis. De utvecklade en lösning för att koppla smarta kontrakt till verkliga datakällor och bankbetalningar.
Det första officiella Chainlink-nätverket lanserades 2017, efter en framgångsrik ICO som drog in 32 miljoner USD. Whitepapret – som lade grunden för tekniken – kom samma år, och projektet har sedan dess växt till en nyckelspelare inom blockchain.
Hur fungerar Chainlink?
Chainlink gör det möjligt för smarta kontrakt att använda extern data. Det fungerar ungefär så här:
- Oracle Selection
Användaren skapar ett Service Level Agreement (SLA) som beskriver vilken typ av data som behövs. Plattformen parar ihop detta med oracles som kan leverera den efterfrågade informationen. LINK-tokens sätts in som säkerhet. - Data Reporting
Valda oracles hämtar in datan från externa källor, bearbetar den och skickar den tillbaka till det smarta kontraktet. - Result Aggregation
Chainlink-nätverket analyserar svaren och utvärderar datans noggrannhet. Resultatet matas sedan in i kontraktet, samtidigt som varje oracle får ett pålitlighetsbetyg.
Chainlink använder en Proof-of-Stake-modell för säkerhet, där oracles som stakar mer LINK prioriteras.
Vad är det som gör Chainlink unikt?
Chainlink låter blockchain-appar interagera med verkliga händelser – säkert och pålitligt. Det kan handla om att hämta in valutakurser, API-data, väderinformation eller banktransaktioner – i realtid.
Istället för att varje utvecklare behöver skapa egna datakällor för sina smarta kontrakt, erbjuder Chainlink en decentraliserad, flexibel lösning som kan användas direkt – utan extra integrationer eller avgifter.
Vad är LINK-tokenen?
LINK är den inbyggda kryptovalutan i Chainlink-nätverket och används för att:
- Betala noder (oracles) för att hämta, verifiera och leverera data.
- Staka i nätverket som säkerhet – högre stakade mängder ger prioritet.
- Belöna pålitliga oracles och stimulera nätverkets tillväxt.
LINK är en ERC-20 token som fungerar på Ethereum-nätverket och är en av de mest använda utility-tokens i DeFi-sektorn.
Hur kan jag köpa Chainlink?
Vill du lägga till LINK i din portfölj? Det är enkelt i Tap-appen.
- Handla LINK direkt med andra kryptovalutor eller fiat-valutor.
- Använd debetkort eller kreditkort (Visa eller Mastercard) för att köpa LINK direkt i appen.
- Lagra och hantera dina LINK-tokens säkert i den integrerade plånboken.
Redo att ta steget? Utforska Chainlink via Tap och få direkt tillgång till ett av kryptovärldens mest spännande projekt.
Cryptocurrency whitepapers are detailed documents that outline the project's intentions, products, and infrastructure. While there isn't a rule on what needs to be included, most projects aim to share as much information about how the project aims to succeed in the hopes of building investors' trust, and interest.
Some of the topics typically covered include a summary of the project's team, goals, products, features, and tokenomics. When researching a blockchain or cryptocurrency project, whitepapers are a very good place to start.
What is a whitepaper?
A typical cryptocurrency whitepaper is usually a report or guide that teaches its readers about a certain topic or problem. As an example, developers might make a whitepaper covering their software to inform users about what they are constructing and why.
In the crypto space, a whitepaper is released by a project and assists in outlining the technical guidelines and core features of the project. While many whitepapers focus on specific coins or tokens, they can also be concentrated around various types of projects, like decentralized finance (DeFi) platforms, for example.
Cryptocurrency whitepapers will typically consist of statistics and diagrams outlining the project's core date, as well as the governing structure of the project, the team involved in creating and leading it, and their roadmap (current and future development plans).
What value do crypto project whitepapers serve?
Despite not being worth a monetary value, whitepapers play an important role in the crypto space. While there are no official criteria for creating them, whitepapers are integral to investors, researchers, developers, and industry insiders.
A great place to start for anyone interested in a project is to read through the whitepaper. If you're considering investing, it's best to meticulously read through it again. Whitepapers often provide insights into the project's potential red flags and a means to monitor whether they are sticking to their forecasted timeline.
A number of blockchain projects that have crashed displayed subtle warning signs in their whitepaper, like promising a deliverable without providing any evidence on how it will be executed.
How does one make a cryptocurrency whitepaper?
There are no official rules or outlines that projects need to follow when creating a crypto whitepaper, each blockchain project may determine what is best for that individual situation. As mentioned earlier, these are often the first official documents outlining the project to potential investors, so thorough and informative content depicting the project's structure, goals, and roadmap is best included.
Whitepapers should always be neutral, and avoid persuasive language or making too many promises. This is essentially a "business plan" in the crypto sense released to investors or the public prior to launching.
What info is included whitepaper?
Objectives
Whitepapers are created by founders to provide a comprehensive overview of both the project and the goal. For instance, Bitcoin's whitepaper describes the project's core objective as "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."
While Ethereum's whitepaper describes its intention as "The intent of Ethereum is to create an alternative protocol for building decentralized applications."
In a good cryptocurrency whitepaper, the project will outline what specific problem it aims to solve, and how it will improve various aspects of people's lives. Be cautious of projects that promise the world but have little in the way of evidence to back these claims. In the ICO boom of 2017, thousands of projects overpromised and underdelivered (if they delivered at all).
Blockchain specifications
Whitepapers will typically include how the cryptocurrency will work and function in the greater crypto ecosystem. This might outline technical aspects like the consensus mechanism the blockchain will utilize and how the decentralized aspect of the network will function.
Tokenomics
Another core piece of information that should be included in a project's whitepaper is the tokenomics. This will include information on the token, how it will be allocated, whether will it participate in token burns, or any incentive mechanisms.
Roadmaps
Roadmaps (a project timeline)are not just useful to see how a project aims to deliver on its objectives, but also provide insights into whether the project can keep up with its promises. While missing a deadline isn't a deal breaker in the crypto space, being open and communicating why is important.
Readability
A well-articulated whitepaper will typically be written in a manner that anyone can understand them. However, its important for the new blockchain project to also include certain technical specifications to provide evidence of the project's competence. Anyone can write a whitepaper, it takes technical know-how to create a blockchain platform.
Tips for reading a cryptocurrency whitepaper
- first and foremost, ALWAYS read a project's whitepaper before investing
- read whitepapers with a pinch of salt, they must be neutral and not over-promise
- Look into the team members and their experience in the crypto and blockchain realm
- a great idea doesn't necessarily mean it will be used or adopted
- look for technical explanations that showcase the project's understanding
Examples of crypto projects’ whitepapers
The Bitcoin whitepaper (2008)
The instigator of the entire cryptocurrency industry, Satoshi Nakamoto, an anonymous individual or group, published the Bitcoin whitepaper in 2008. The paper is called "Bitcoin: A Peer-to-Peer Electronic Cash System."
The whitepaper explains how Bitcoin can be used as a more efficient and decentralized form of money, outside the traditional banking model. It gives technical explanations of how the peer-to-peer Bitcoin network allows users to send digital currency without intermediaries. The whitepaper also outlines how the Bitcoin network is resistant to censorship and double-spending attacks.
The project launched two months later in January 2009.
The Ethereum whitepaper (2014)
While Bitcoin launched the crypto industry, Ethereum played a pivotal role in the development of the blockchain space. The Ethereum whitepaper was published in 2014 by a young developer named Vitalik Buterin and titled "Ethereum whitepaper: A Next Generation Smart Contract & Decentralized Application Platform."
In the Ethereum whitepaper, Vitalik outlines how the platform's intentions differ from Bitcoin's. The whitepaper outlined how the platform would allow developers to create and launch decentralized applications (now commonly known as dapps) and included technological solutions that backed these goals, such as the Ethereum Virtual Machine and smart contracts.
In conclusion
Crypto whitepapers are not legally regulated, meaning that anyone can write one. Although a cryptocurrency whitepaper should provide readers with an understanding of what the project plans to do and how, it's crucial, if you're interested in a particular project, to consider red flags and risks when reading through the document.
Decentralized Finance, or DeFi, opens up a whole world of financial services for you, ranging from straightforward banking services to complex financial instruments similar to those used by hedge funds and investment bankers. But here’s the twist: it all operates with cryptocurrencies instead of traditional cash.
In DeFi, you can stake your cryptocurrency in what are called smart contracts, which essentially means locking up your funds to earn interest, known as Annual Percentage Yield (APY). As a token of appreciation for staking your funds and providing liquidity, DeFi projects grant you special project-specific tokens. These tokens aren’t just a thank-you note—they give you a say in the project’s future decisions and carry some speculative value too.
Before we get started, let us first address several terms you are likely to come across in this piece:
- Financial institutions are your traditional banks
- Centralized exchanges are crypto exchanges that are operated by a managing company
- Decentralized exchanges are crypto exchanges that are not managed by one company and typically work in a peer-to-peer manner.
- DeFi is decentralized finance and refers to the industry in which regular users can engage various financial services requiring only an internet connection.
How smart contracts work in the DeFi space
A smart contract is a digital agreement that automatically executes once the predetermined criteria have been met. These computer codes are facilitated by blockchain technology and rely on the blockchain that they are built on.
At the moment, your bank account from financial institutions might give you the right to a certain amount of monthly interest at a fixed rate. The deal is reached through a formal application procedure - which can take many days - that is handled by a mix of people and software and is acknowledged in writing. Once successful, the bank account is opened and you have access to the services.
A smart contract, on the other hand, uses a programming language (e.g. Solidity on Ethereum) to map out the mathematical aspects of an agreement - how much interest is due when and where it should be paid - while the underlying Ethereum blockchain executes the contract for a fee, making it transparent and unchangeable.
The ups and downs of the DeFi ecosystem
owever, it’s not all smooth sailing. DeFi can offer higher returns than traditional banks, which is quite appealing, but it also comes with higher risks. For instance, if something goes wrong with a smart contract, or you lose access to your private keys, there’s no safety net to catch you.
To dip your toes into DeFi waters, you’ll need a digital wallet like MetaMask and some funds from a cryptocurrency exchange. Once you’re set up, you can participate in various DeFi activities like lending or staking, each with its own set of fees depending on the network you’re using.
Additionally to the higher returns, DeFi tokens have also seen a rise in value, with some entering the top 20 and top 10 biggest cryptocurrencies based on market cap.
Furthermore, the value of DeFi tokens has surged, with some climbing into the top ranks of cryptocurrencies by market cap. This growth indicates a strong interest and a robust market presence, which can be exciting for anyone involved in the space.
However, it's not all smooth sailing. DeFi comes with its own risks that you should be aware of. For instance, executing smart contracts can get pricey, especially during times of network congestion. If you're looking to cut down on fees, you might want to explore alternatives to popular platforms like Ethereum, which can be more cost-effective.
Also, not all smart contracts are built the same. Some may have vulnerabilities that could put your funds at risk if not properly managed or if an error in the contract execution occurs. This highlights the importance of being careful with where and how you invest your digital assets.
Moreover, the decentralized nature of these platforms means that you’re in full control—which sounds great until you realize there is no safety net. If you lose access to your private key or make a transaction mistake, there's no customer service line to call for a do-over.
Ensure you vet various DeFi protocols before engaging
In general, more established Defi protocols with a higher total value of assets secured within them (also referred to as Total Value Locked, TVL) are safer. This is due to the fact that their code has been more thoroughly audited and "battle-tested".
Newer platforms will typically offer higher APYs in order to entice investors and build up liquidity. While this may sound lucrative, always ensure that you've done your research in order to understand exactly how the protocol operates and who is behind the project.
Here are a few things to look out for:
- Has the protocol's code been professionally audited?
- How long has the project been live?
- What is the platform's TLV? (The higher the better)
Finding your top Defi protocol
There are a number of "well-established" DeFi platforms that have proven reliable and trustworthy in recent years. While the risks are still prevalent, these are the most established options when looking to enter the DeFi space with the leading DeFi protocols.
How to use DeFi protocols (Get started in DeFi)
Jumping into the world of DeFi protocols can be quite an adventure. Here’s a simple guide on how to get started :
First, you'll need a digital wallet, and MetaMask is a popular choice. It's user-friendly and a common gateway for engaging with DeFi platforms.
Once you have your digital wallet, you'll need to move your cryptocurrencies into it. This is usually done through a transfer from a centralized exchange. For example, if you have a Tap wallet, you can transfer Ethereum (ETH) or other supported assets directly into your MetaMask wallet. Remember, DeFi protocols operate with cryptocurrencies, not traditional bank funds.
With your wallet set up and your funds in place, you can connect to any DeFi application that interests you. You can then engage with various features of the platform, such as depositing funds into a lending protocol. Keep in mind that actions like depositing, staking, unstaking, or withdrawing will typically involve network fees, which vary by blockchain.
That’s all there is to it! With these steps, you can start exploring the different functionalities and opportunities within DeFi at your own pace.
Understanding the risks associated with DeFi
While we've stressed that using tried and tested DeFi platforms provide a higher level of security, there are still risks associated with the DeFi space.
Below are some more steps you can do in order to secure your cryptocurrency assets and decrease the chance of losing your funds.
- Consider insurance, look into options for insuring your assets to help mitigate potential losses.
- Research the team behind the project, do your due diligence.
- Familiarize yourself with the platform's operations and features. For instance, if a platform advertises a certain return rate, such as 10% APY, delve into how they achieve those figures.
- Don’t commit more than you can afford to lose
Decentralized finance is one of the most innovative and promising areas in cryptocurrency. It is also a harsh environment, however, that demands some expertise before stepping in.
Before you place any funds into Defi protocols and become one of the many liquidity providers, ensure that you've fully vetted the project and considered the pros and cons of what it has to offer. Also ensure that you understand how the platform operates.
The DeFi space can be both lucrative and devastating, it is complex and requires a good amount of know-how. If you wish to get involved, take the time to really understand both the opportunities and the challenges it presents first. This way, you can engage with DeFi more cautiously and equipped with the necessary knowledge. And remember with Defi everything is at your own risk.
The Lightning Network is a second layer solution that enables Bitcoin users to make fast and cheap transactions without compromising on security. The layer two technology allows users to enjoy the benefits of both the Bitcoin and Lightning Network layers simultaneously. Learn more about the Lightning Network solution below.
The Bitcoin trilemma
In order to compete with other payment channels like Visa, the Bitcoin network must be able to process transactions much faster and at a fraction of the cost. However, this scaling cannot come at the expense of decentralization or security.
The "Bitcoin trilemma" is a term used to outline the conflict between these three principles, scaling, security, and decentralization.
The aim of Bitcoin Cash, Bitcoin SV, and other forks was to increase the block size in order to make Bitcoin transactions faster and more affordable on-chain.
However, these attempts failed to produce an effective method to transact quickly and inexpensively on-chain while still maintaining Satoshi's design. Hence, the Bitcoin Lightning Network.
The lightning network payment channels solution
Is it possible for the Bitcoin network to have it both ways, to keep its original architecture while also functioning as a fast micropayments network? The answer is yes, and thanks to the advent of Lightning Network transactions, Bitcoin can be used for everyday transactions like paying for a cup of coffee.
The Lightning Network is a type of layer two solution that is compatible with the Bitcoin service. This off-chain solution was first conceptualized in 2015 by Joseph Poon and Thaddeus Dryja.
The Lightning Network works by removing the burden of micropayments from the Bitcoin blockchain and instead utilizes multiple payment channels, which are controlled via multi-signature (multi-sig) Lightning Network wallets.
Why the lightning network?
How quickly can the Bitcoin network process transactions? Bitcoin is presently capable of processing between 2 and 7 transactions per second.
Visa, the current payment channel that drives your debit and credit card transactions, handles 150 million transactions each day, that's 24,000 transactions per second.
In order to make Bitcoin a competitive service to Visa, the Lightning Network needs to be implemented. This channel ensures that micropayments are instantly and cost-effectively executed, and is able to process thousands to hundreds of thousands of transactions instantly.
The core concepts of how the Lightning Network works.
So how does the Lightning Network work? This layer 2 solution works on top of the Bitcoin blockchain, allowing thousands of micropayments to be executed at one time. This lowers the costs and increases the transaction speed of the initial transaction. There are three core components of the Lightning Network: the nodes, channels, and invoices.
Lightning Network Nodes
This software connects with other nodes in order to form a network that connects to the Lightning Network to facilitate the sending and receiving of Bitcoin.
Lightning Network Channel
Users of the Lightning Network establish payment channels with one another so that they may conduct transactions off-chain, which can then be settled (closed) on the mainchain (on-chain).
Invoices
Invoices are QR codes that represent requests for Lightning Network payments on the Lightning Network. Invoices include all of the data necessary to complete a payment on the network, such as the payment amount, which blockchain the invoice is associated with, expiration date, payee pubkey, routing hints, and other information.
How to use the lightning network
In order to make use of the Bitcoin Lightning Network, you will need to open a compatible Lightning Network wallet. Once you have downloaded and signed up for the wallet, you will need to send funds. Simply locate the wallet address of the Lightning Network-enabled wallet and send the funds via your normal payment channel. Once the funds appear in your wallet, you can then send transactions via the Lightning Network to other enabled wallets.