How a decentralized web can energy the Latin American economic system
It's no secret that the Latin American economy is not in good shape compared to other regions.
There is no single reason for that. They could indicate a reliance on commodity exports and their booms and bust cycles, government corruption, income inequality, or a combination of all of them.
Diego Gutiérrez Zaldívar is CEO and co-founder of IOVLabs, the blockchain development company responsible for Bitcoin's RSK intelligent contract network and its RIF infrastructure layer. In 2019, he oversaw the acquisition of Taringa !, Latin America's largest Spanish-speaking social network. This article is part of the CoinDesk "Internet 2030" series.
The events of 2020 are likely to weigh on the people of Latin America (LatAm) in particular. The OECD previously warned that the region has less “fiscal space” to deal with the economic impact of the pandemic than it did before the last crisis in 2008.
However, I believe the tide is changing. Given the current trends between connectivity, digital payments, fintech investments and decentralized financing (DeFi), it seems realistic that Bitcoin and DeFi dapps will be able to offer Latin America the opportunity to enter a highly networked and efficient regional economy in the next 10 years .
A decade of adoption
In contrast to the top-down European model, this financial ecosystem is created from the bottom up. This trend can already be seen in the case of Mexico, where currently 5% of US transfers were processed via cryptocurrencies and Venezuelan families abroad sent money home with Bitcoin. Similar to how cell phones disrupted the African economy, this new financial infrastructure has the potential to open up new markets and create a new, decentralized, peer-to-peer economy.
Within a decade, I envision Latin America building a regional economy from the ground up. An economy that can stand out from an oppressive, government-driven fiscal policy – a true peer-to-peer system, powered by people – and based on blockchain technology.
The relevance of the technology introduction for the region is already evident. Currently, LatAm is the world leader in the use of smartphone apps and the network infrastructure is growing rapidly accordingly. It is only a matter of time before examples from the digital gig economy such as “virtual babysitting” influence local business models for individuals and companies.
See Also: Why It's Time To Watch Out For The Booming Crypto Market In Mexico
In addition, online education is becoming more widely available, as demonstrated by recent initiatives such as Google's online study program. I believe these advances will play a key role in helping LatAm catch up with more developed economies without going through intermediate stages of development.
Many of the world's most vulnerable populations and half of Latin America are denied access to basic financial services. Approval-less payment solutions and reputation-based digital identities are now being developed that will serve as pillars for economic change.
The coming years could be a newborn era in Latin America driven by a peer-to-peer digital economy.
The combination of the two enables the non-banks to conduct peer-to-peer transactions regionally or even globally, creating new innovative business models with the added benefits of geographic arbitrage.
For example, local online food cooking classes are broadcast over the internet to anywhere in the world, with payments made in Bitcoin or highly accepted stable coins.
People no longer have a physical ID, but rather prove their identity and login information by scanning a QR code or using digital online signatures. User interfaces are based on apps and browsers, but are supported by open blockchain networks without users having to know or care about the underlying infrastructure layers.
No need to bank the Unbanked
In addition to digital identity, what is now hyped as DeFi is another trailblazer for the transition to a peer-to-peer economy. Latin America will unite economically through crypto-assets and economies that will become the region's exchange and store of value and become a decentralized banking system.
Loans, credits, hedges and speculations are available to local residents in an easy and safe way. And perhaps most importantly, the residents of LatAm will be able to raise capital and income from a global audience of investors.
See also: Alejandro Machado – Venezuelans look to crypto dollars for financial security
Take, for example, my hometown of Buenos Aires, where I've been working with local meetup groups since 2013 to raise awareness of the digital and bitcoin economy. If one of these local communities develops an initiative that needs funds to grow and grow future profits, they can symbolize the future income of the community, thus creating financial incentives for global investors to help them grow. Future revenue generated by the community is shared with investors, and the incentives stay aligned across all groups – which makes everyone happy.
The introduction of stablecoin in Latin America will continue to thrive as it provides the ability to do business with others in the region across borders without having to convert national currencies or manage their volatility risks.
A decentralized Internet – no longer a buzzword
The social fabric of Latin America will also change by 2030. In addition to the distrust of government institutions and politicians, we are also seeing a trend where people no longer trust today's social media platforms due to data collection and advertising revenue. Through the pillars of self-sovereign identity and a digital economy, I can imagine a future in which a completely decentralized Internet would ultimately give people control over their identity and data.
Taringa !, the largest Spanish-speaking social media platform in the world, is already experimenting with a new paradigm in the decentralized social sharing economy – and could be the beginning of a more comprehensive transformation in which other communities introduce new data protection and open business models.
See also: The Web Wasn't Designed for Privacy, but It Could Be
Imagine a fundamental departure from today where some technology giants are making huge profits at the expense of advertisers and end users. I see a future where social media platforms are made up of users who receive fair incentives that are directly tailored to the size and engagement of their followers. Where companies can market their goods and services directly to consumers who want to buy them. One in which the Internet is operated by a shared, distributed "supercomputer" without individual sources of error.
Once individuals are in control of their data, they can benefit from it too. The new internet is censorship resistant and a person's privacy is completely protected. Users will be in control of the Internet, unlike some business groups like today.
My home region is currently in a prime position. "Unprecedented" is a word that has been overused in 2020, but it is the only appropriate term to describe a way to remove an entire region's economic dependence on raw materials. After decades of widespread corruption, financial volatility, high levels of poverty, and income inequality, the coming years could be a newborn era in Latin America fueled by a peer-to-peer digital economy.