Blockchain: A World of Possibilities for Emerging Economies

Usually, I use this space to share my experiences around team building and team development, which has been my focus in recent years. However, this time I want to share something different with you. A little over four months ago, I made the decision to move to a different industry and to join a blockchain project in which not a single day has gone by in which I did not learn something new. It is a different world from the one I was used to and that has led me to challenge many of the models through which I understood products and the way those models worked.

The project’s name is Meta Pool and it is a decentralized finance (DeFi) platform that allow NEAR token holders (and soon Ethereum holders as well) to stake their assets and get rewards from doing that; the company also creates products that allow those token holders to use the staked token. If your knowledge of the blockchain world is the same as mine was  six months ago, maybe my description hasn’t helped you much in understanding what we do. Please keep reading until the end, as I will explain it in a while, but first I want to tell you about what has blown my mind the most during the time that I have worked in the blockchain world, which are the possibilities it offers to improve access to financial services so that people can take actions that allow them to achieve financial freedom.

But let's take this step by step, because I would like everyone who reads this article to be able to understand it and see the possibilities that I am talking about.

Blockchain 101

Blockchain is a decentralized database that stores information and allows users to make transactions. It also keeps a record of all changes and actions carried out. This information is stored in "blocks" that are linked together, forming a chain of information records (block-chain). The information stored in the blockchain is transparent and available to anyone who wants to review it.

Summarizing, blockchain transactions work as follows: The user requests the transaction, that transaction is sent to a network of nodes (computers connected to each other) that validate it, once the transaction is validated, the node executes it and adds it (including the information of those who were involved in the transaction) along with other transactions to a new block that is then added to the history of the blockchain and propagated to the rest of the network. That block cannot be modified.

The blockchain operation is supported by users and nodes, not by corporations or organizations that may make use of the data and control the transactions, which removes some of the dependencies that currently exist regarding access to certain technologies or financial options. There are no intermediaries, everything is defined in smart contracts and validated by computers, thus eliminating the need for trust between the parties involved in the contract. Each transaction is validated by more than one node, which prevents the possibility that third parties may interfere or modify the information.

At this point you may be wondering: how is this going to lead us to financial freedom and how does it help people in emerging economies fight inflation? I’m getting there… 

Blockchain and Its Benefits In The World of Finance

Blockchain technology has brought multiple possibilities for the transformation of the financial world, but it has also opened the possibility for people to make use of this technology and generate applications that allow them to take advantage of its benefits and access options that were previously accessible only for people with a certain profile.

According to INEGI, in 2021, only 67.8% of people between the ages of 18 and 70 had some type of formal financial product; however, less than 50% of them had access to any credit. On the other hand, even if a person has access to a bank account, there are some financial products that are only accessible to those who have a certain credit history, or to those who have large amounts of capital to invest. That is where blockchain, through decentralized finances, comes into the equation.

DeFi is the area of blockchain that focuses on building a fully digital financial system. Being a blockchain application, it uses block chains instead of traditional intermediaries and fiduciary mechanisms, creating an entity that can have a functionality similar to a brokerage house, but without the dependence on organizations for the operation, in which everything works according to what is established in the smart contracts and making it accessible to anyone with internet access, regardless of their race, gender and social class.

The applications that exist within the DeFi ecosystem are lending platforms, prediction markets, options, bonds and derivatives, financial products that were not accessible to certain sectors of the population or certain regions and that now can easily help people to start building their financial freedom. In addition to this, DeFi offers those who use it the possibility of accessing platforms where currency exchange is possible, allowing many to make savings in other currencies and even have access to the more affordable costs (lower than those of banks) of certain foreign exchanges.

In the months that I have been working in this world, I have been in contact with projects that seek to facilitate the sending of remittances using stable coins, others that manage loans using cryptocurrencies as collateral, crowdfunding platforms that allow people to invest in crypto projects using rewards, among many other options. Although users are all over the world, in Latin America, I have been surprised by the adoption in countries like Argentina and Venezuela, where inflation has led them to look for alternatives to protect their savings.

One thing that is clear to me is that particularly in emerging economies, people are creating solutions to reduce their dependence on large financial institutions and make them more accessible to everyone. That's something that excites me a lot.

More Possibilities With Blockchain

But blockchain is not just decentralized finance and the possibility of financial freedom; the possibilities go far beyond that. With blockchain, it is possible to keep a detailed record of the ownership of any asset and all the associated transactions (in general, this is how NFTs work), disciplines in the world of art and creativity could distribute their work and have a reliable way of generating profits through the use of smart contracts, transparency in the spending of governments and institutions could become much easier and the issuance of carbon credits much simpler.

What does it take for all this to happen? Simply that people understand the potential and begin to integrate these technologies into their solutions. Much needs to be done in terms of the usability of the tools that use these technologies, but I have no doubt that massification will help evaluate and improve applications more quickly.

If your business involves transactions, ownership definition, and transparency is one of your business priorities, surely you could start using blockchain and get ahead of the adoption of this technology that has come to revolutionize the way we interact with the internet. If possible, do it soon and let’s start transforming the internet.