In the first entry of this 2-part article, we focused on how blockchain technology is empowering platforms that are trying to make the energy sector more efficient or bringing down intermediary parties. In this part, we will see how new start-ups are facing quite a different and yet critical issue, the financial aspect of the world as well as the perils that blockchain misuse can carry along.
If there is something that both blockchain and Sharing Economy models were seemingly made for is to tackle down financial accessibility issues that more than 2 billion people face every day.
Sharing economy infrastructures are made in its very basics by those people, small communities, farmers and local entrepreneurs mainly. These, in fact, are able to access to technology in the form of smartphones or similar, but unfortunately, they lack of support from governments and banking institutions. Banks play a crucial role here as one of the main obstacles for these 2 billion people to access loans that can help to upgrade their living standards. Without banks that back them up or a proper financial infrastructure in their home countries, these citizens are all but cast out of the basic financial services.
Sharing economy networks provide digital common spaces where individuals can support each other and hence growing communities with mutual goals. If allied with blockchain, where transparency and real-time connection are among their traits, the impact that they can made on them might be crucial in the near future.
These platforms are already set off in the shape of small start-ups that are taking up the problem from its roots, promoting lending circles or bringing ease to otherwise complicated leasing infrastructure.
1. Kora and Moeda – Financial Inclusion
In first place, Kora is an initiative that are focus on bringing financial inclusion in a easier and accessible way. Their starting point was 300 farmers in Nigeria, although they plan to expand to other developing countries of Africa, Latin America or Asia. Its network, accessible without internet and through smartphones, originates under-securitized assets, such as agricultural cash flow, mining and corporate equities and bonds into security token chains.
The blockchain plays a key role in Kora’s network as it allows these groups to access financial services at a lower cost and increasing transparency about where their funds are or how they get used. The distributed ledger technology also aims to leverage projects to scale up more easily.
Ongoing user testing is focused on unlocking untapped capital in emerging economies. The program has been successfully released in Nigeria, Peru or Bangladesh, who now have the ability to quickly and easily send and receive funds from cities to rural areas at a low cost.
“While the cost of serving the unbanked is high for traditional financial institutions, technology makes everything possible and scalable,” CEO Dickson Nsofor said recently, and he added that “It is [his] purpose in life to help more of the unbanked and underbanked achieve their dreams and goals while supporting industries in emerging markets as well. We focus on empowering individuals, businesses and communities through our network.”
On the other hand, Moeda’s venture takes the problem differently. Using blockchain as back end technology, they aim to create a cryptocurrency-driven platform that will pursuit to be open and accessible for small ranchers and farmer cooperatives in South America. Starting from Brazil and through its platform, their seed project have created a place where both producers and financial services can meet and help each other in a fair condition. In fact, investors can track their money through the blockchain platform while the cooperatives will have an easy way in into the platform.
“Moeda provides a transparent impact investment platform to impact investors and a banking-as-a-service platform to entrepreneurs who will be receiving loans to not only fund, but to scale and grow their businesses,” Taynaah Reis, CEO of Moeda, said to Shareable recently and “in turn, their local communities will directly benefit,” she pointed out.
2. Karma – Facing the Blockchain perils
Although blockchain presents more opportunities than risks, it has to be well driven off in order to make the impact it is supposed to do in the near future.
Bitcoin, the first ever blockchain platform, has its risks too and has being accused of losing its initial objective. From promoting an open and totally decentralized monetary system, it has bring along some sorts of monopoly in some areas of the planet. While in the beginning peers were seen as watchdogs, now they have become a profit-driven businessman, being suspected of consuming loads of energy resources.
The Karma project is an open and non-profit driven initiative to tackle that down. “Karma is designed to thwart the freeriding problem, encountered in many peer-to-peer systems. Malicious participants in peer-to-peer systems often consume resources without contributing their fair share, or otherwise force other peers into subsidizing them,” they say in their white paper.
And they continue as “a secure exchange mechanism ensures that nodes cannot counterfeit karma; an anti-inflation/deflation mechanism regulates the karma supply to ensure that prices do not over or under-flow; a reward mechanism makes the system incentive-compatible for participants, and a completely peer-to-peer scheme for tracking karma transfers protects against adversaries that corrupt a significant fraction of the system.”
This technology is still at its early stages of development and so, in a computing perspective, relies entirely upon the good will of its peers. These users have been found sometimes trying to hack some nodes of the algorithms or intentionally misusing the platform.
In this race to place blockchain in many new start-ups, computing time gets reduced at the same level that risk levels are increased. Nonetheless, business need to make business in order to grow and the first ones to get a fully operative blockchain platform might leave out of the market other initiatives.
One way these new companies has to rise capital quick is through cryptocurrency driven Initial Coin Offerings (ICOs). Without the need of banking scrutiny or other regulated investors, some ICOs throw to the crypto-exchange markets tokens of their yet-to-be-created company to get funding quickly while the investor receives a sort of stake from the company.
While the number of ICOs rapidly grow, the perils they carry along increase too. Some of these ICOs come from companies that haven’t been registered according to the market rules or they just look for easy funding to end up in nothing. Lack of regulation from international institutions and a open and wild digital environment don’t make things easier, resulting in high rates of scam made by inexistent companies.
These examples just come to underpin an ongoing theory about the “two worlds” within blockchain expansion. As cited by Shareable in a recent article, Emin Gün Sirer, a computer science professor at Cornell University and founder of Karma, said:
“Deep down, the underlying ethos in these two worlds is different. In one, you have these highly individualistic, highly profit-driven people and they want to make money. And in the other, you have the exact opposite type of people. They want to make the world a better place and they don’t care about personal monetary compensation, typically.”
Hernaldo Turrillo is a freelance journalist working now for IntelligentHQ. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. He was born journalist and became a thinker. Knowledge has no limits.