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New partnership aims to take DeFi to the unbanked

New partnership aims to take DeFi to the unbanked

Decentralized finance (DeFi) has grown steadily across 2019 but still hasn't arrived where it's needed most. Algorand aims to change that.

Alogrand, the brainchild network of Turing Award-winning cryptographer Silvio Micali has partnered with the International Blockchain Monetary Reserve. They have the ambitious goal of bringing decentralized finance to the unbanked and eradicating corruption.

The product of the partnership, currently undergoing a token sale, is the Asia Reserve Currency Coin (ARCC) – a homegrown alternative to Libra targeted at the more than 300 million people across Southeast Asia that don’t currently have a bank account and lack access to credit, investment, and insurance.

Social proof of work

The project is led by businessman Sinjin David Jung, a former resident of the Philippines who has personally witnessed the role of corruption in holding back development across Southeast Asia.

To root out the corruption, the platform uses a consensus mechanism that replaces the process of mining using silicon chips and algorithmic puzzles, as in proof-of-work based cryptocurrencies, with a process that generates tokens when citizens submit information about incidents of corruption; like like the number of actual electrical brownouts per month, or the severity of regular flooding which exposes the lack of improvements of infrastructure due to a pocketing of public funds.

This consensus mechanism is termed ‘social proof of work’, and is designed to help minimize trust where it matters most — in emerging markets where entrenched corruption stifles development and perpetuates the cycle of poverty.

Users log allegations of corruption via a mobile app in much the same way they might record details of a traffic jam on a crowdsourcing app like Waze. But the difference is, the data collected is aggregated anonymously on the blockchain as an immutable record of systemic corruption, and users are rewarded for their contribution with the generation of a fixed amount of crypto tokens.

The collected data can then be cross-referenced against other sources and used as a "public mandate for change."

The Asia Reserve Currency Coin (ARCC) is designed to eventually become the “regional crypto-reserve currency of Southeast Asia” and form the foundation of an inclusive financial ecosystem.

It’s certainly an ambitious goal but there will be significant adoption hurdles to overcome and it’s not yet known how citizens and officials will react to the ability to anonymously report on perceived corruption issues.

DeFi on Algorand

The blockchain chosen to support this vision is Algorand, a project described by Ninos Mansor of Arrington XRP Capital as, “macroeconomics meets cryptocurrency.”

ARCC will be ALGO tokens running on the Algorand Standard Asset (ASA) token protocol which launched in late November. This protocol operates on the recently updated Algorand 2.0, which claims to be the world’s first pure proof-of-stake blockchain that doesn’t sacrifice decentralization for performance and is capable of hosting enterprise-scale Dapps.

These might seem difficult promises to keep, but the platform has already proven popular with other projects, including the high-profile Hybrid IPO of World Chess which relied on both Algorand’s Blockchain and the London Stock Exchange.

Once the App is up and running and funds are flowing in from users reporting corruption, the International Monetary Blockchain Reserve has big plans for the tokens.

These include a system of basic health, property, and life insurance for users that opt-in, and a peer-to-peer investment platform where users can pledge funds for other local entrepreneurs with all transactions locked into a smart contract.

Sean Ford, COO of Algorand, spoke to Brave New coin and said, "Addressing the world’s biggest issues, such as breaking the cycle of poverty, are significant undertakings and require collaborative efforts. This partnership between IBMR and the open-source Algorand platform strives to promote financial inclusion and create a positive social impact. This unique use case is just one example of the many to come that can be powered by Algorand’s technology. We’re excited to see more organizations leveraging the layer-one infrastructure to remove friction from economic exchange.”

For many, however, the call to serve the unbanked will sound only too familiar — the ICO boom of 2017 saw dozens of token projects supposedly aiming to offer financial services to the unbanked, few of which are operational today.

But as the recent trips of Mark Zuckerberg and Jack Dorsey to Africa show, interest in serving the unbanked with blockchain-based solutions hasn’t waned. Although regulatory barriers and infrastructural issues make the prospect challenging, the sheer number of unbanked people in developing regions makes them fertile ground for cryptocurrency adoption.


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