Thought Leadership

Collateralizing Rural Loans with Non-fungible Tokens by Robert Greenfield

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“Globalization is exposing new fault lines — between urban and rural communities...” — Ban Ki-moon

As the world continues to modernize, and globalization becomes synonymous to ‘business as normal,’ banks have shifted their focus in the provision of financial services from small businesses and commercial accounts to multinational lending and complex offerings — offerings often targeted to appease large corporations, high net worth individuals, and large scale, for-profit interests.

This transitional focus has identified fault lines between urban and rural communities, emphasizing the lack of adequate access to basic financial services in agrarian areas. The over 3.41 billion people globally that reside in these regions have an innate desire, much like their urban counterparts, to develop and expand their businesses and economic opportunities in their respective localities.


Yang 2011

Yang 2011

So how can we extend these financial services in a convenient, transparent, and fair way given the current structure of traditional rural banking? Let’s take a look at what rural banking looks like, where inefficiencies limit its economic outcomes, and how further digitizing rural financial services can invite hundreds of millions of people into a new, unbanked, peer-to-peer economy of financial services.

Introduction to Rural Banking

Rural banks refer to financial institutions established in rural areas (typically agriculturally focused) to support local community members, their agricultural developments, and their locality’s overall economic development. Almost a quarter of the United States population lives in rural communities, and this percentage only increases across the international community (Supporting Mortgage Lending in Rural Communities, Brookings Institute). Contradictory to cultural belief in the U.S., these regions are comprised of large communities of color, which speaks to the macro-economic implications of how these communities fair socioeconomically during times of international recession (The Brookings Institution).

Rural banks typically provide simple financial tools, including bank accounts and loans. In most western nations, these loans usually represent home mortgages or agrarian business loans and are provided with the expectation of an interest payment as well as a relatively good credit assessment of the consumer. In most emerging economies in South America, Asia, and Africa, where the average consumer’s income is multiple order of magnitudes lower than their western consumer counterparts, and consumer credit reports may not be readily available, loans are provided on collateral like land, and, most recently, livestock.

So how do collateralized loans work? 

With this type of loan, you can borrow money by putting down an asset as collateral. Commonly referred to as “secured loans,” collateral loans are considered less risky because your lender can take your pledged assets if you default (LendingTree). Car loans and home loans (mortgages) are a perfect example — in both cases, a person has borrowed money while securing their loan with an asset.

Collateralized loans provided by rural banks in emerging economies typically leverage land and livestock as collateral, as many of their consumers either don’t have the credit reference, title documentation, or otherwise means to access other traditional loan services.

Rural Development, Consumerism, & Economic Growth

According to development economics, the main factors to promote economic growth can be divided into three aspects (Yang, 2010):

  1. Growth caused by capital input

  2. Growth caused by labor force input

  3. Growth caused by comprehensive elements such as management, science, technology and education

Proposed solutions that fuel such developmental growth must attend to the diverse array of financial demands in rural communities, including that of rural consumers, small and medium enterprises, and rural local governments.

The rural consumer segment is divided across three core consumer groups:

  1. Rich Rural Consumers— A small proportion of rich rural consumers are mainly non-agricultural by replacing the traditional agricultural production with new agricultural production (such as cultivation). They have great capital needs and definite plans for their capital use as well as the repayment term and hence little risk (Yang, 2010)

  2. Average Rural Consumers — Average rural consumers who take up a large proportion of the total rural population, have financial demands for both agricultural production (chemicals, seeds and so on) and living (children’s education, medical health). Due to the short cycle and strong seasonality, they mainly turn to their relatives and friends and they can repay their loans punctually if turning to banks (Yang, 2010)

  3. Impoverished Rural Consumers — Poverty stricken households have financial demands for medical care, food, housing, and so on, which embody great risks due to the large amount of capital and the long repayment term (Yang, 2010)

Small and medium enterprises typically employ the vast majority of laborers in rural economies and can also be divided into three sub-categories, including agricultural materials and production companies, supply and marketing companies, raw materials companies, and industrial/mining companies. Generally, agricultural companies call for less capital in their establishment and operation while the latter two call for either larger scales or a large amount of start-up capital and therefore need strong financial basis(Yang, 2010).

Local governments typically seek effective investment and financing channels more broadly to guarantee sound agriculture development and to provide necessary public materials (Yang, 2010).

Financial Difficulties of Rural Consumers

The financial difficulties that rural consumers face on a global scale can be divided into the following obstacles:

  1. Inconvenient travel time to the nearest bank to take advantage of available financial services

  2. In the presence of moral hazard, farmers will prefer not to borrow even though the loan would raise their expected productivity and income (Crop Price Indemnified Loans for Farmers). There is a well-established culture of ‘risk rationing’ across households who never tried to access the formal market because of the high risk associated with borrowing due to consequences of default,

  3. Higher interest levied by traditional banks to mitigate loan risk associated with rural consumers, who often do not have a ‘credit score’ or proper collateral to offer

  4. Inability to establish future markets and other risk management tools to decrease price variability in emerging economies due to a lack of infrastructure to support traditional market architecture (Crop Price Indemnified Loans for Farmers)

  5. Disproportionate and systemic control of the liabilities of minority communities (rural, ethnic, or otherwise) due to predatory state policies

  6. Social collateral, or ‘lending relationship strength,’ isn’t taken into consideration in westernized markets, creating a cultural dissonance between financial tools available and the people looking to use them. Relationship lending dominates in economies where the likelihood of strategic default is high because of an underdeveloped financial system with low transparency and weak legal enforcement (Egli et al., 2006).

  7. Information asymmetry between banks and farmers

  8. Lack of relevant education available in rural areas to decrease potential collateral requirements

  9. Available collateral documentation is not accepted by local lenders, or leads to a very slow legal process (particularly regarding land rights)

The common theme and message across these market obstacles is clear — the traditional mechanism of finance cannot adequately support rural consumer needs AND maintain a risk mitigated, capitalistic strategy. So how can we begin to disinter-mediate this operational friction within rural markets?

Tokenization of Non-Fungible Assets

As a very quick introduction before we move forward, we’ll need to touch on Non-Fungible Tokens, or tokens that represent non-fungible assets (otherwise known as ERC721 tokens). Examples of such tokens are as follows:

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Tokenized Real Estate — Meridio

Meridio converts individual properties into digital shares on the blockchain, seamlessly connecting diverse investors and asset owners to invest and trade. Home equity is a non-fungible asset that, traditionally, requires a massive amount of resources and risk to own. The paperwork associated with homeownership and every real estate transaction is far too much for any individual consumer to process, and there are many intermediaries between the initial offer and the closing agreement that inflate the cost of ownership. By tokenizing equity, and effectively securitizing ownership of a single property, the barrier to investment entry almost disappears, and proof of ownership and sale are all immutably recorded on the blockchain, so there is no need for keeping your fractional title in a lockbox.

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Tokenized Digital Assets — Cryptokitties

Cryptokitties is another example of non fungible tokens. In this case, we have unique digital assets in the form of cute kittens. The price of these assets are far more speculative than real estate, but they represent a perfect example for use case scenarios like artwork, music, and other non-fungible assets that draw their value from both cultural relevance and subjective valuation.

So if there’s already tokenized real estate, and tokenized kittens, why can’t there be other tokenized forms of non-fungible collateral operating within the rural banking space?

Digitizing the Rural Bank Loan Process

Many of the inefficiencies of rural banking stem from risk mitigation obstacles and lack of consumer access. Credit score structures, much like the FICO score in the United States, are few and far between in emerging economies, and oftentimes even those scores, when available, can be extremely subjective depending on the consumer’s ethnic background and credit security (if identity theft occurs). Even when proper credit and collateral is established, the process to prove ownership of such collateral and settle the transaction to afford a loan is a lengthy and stressful process.

By tokenizing commonly available forms of collateral in rural economies, like land and livestock, and developing commercial, monetary policies that govern expectations of the settlement process and which data must be available on the public chain to more easily verify asset ownership, the rural financing market can become much more liquid than it is now and rely on new forms of loans that aren’t issued just by central authorities.

In my article, Unbanked for Good, we delved into the high smartphone penetration in emerging economies, and the likelihood of these regions to leapfrog traditional methods of sending and accepting capital as they sprint towards a mobile-first, cashless society.

Therefore, it is no stretch of the imagination that, with the increased prevalence of stable cryptocurrencies like DAI, the development of new collateral assessment vehicles, and the development of new, legally recognized asset tokenization processes, that a rural consumer could:

  1. Document their available assets. This could be livestock, land, even recyclables — any material that could be commercially converted to value without too much operational friction

  2. Provide available means of ownership for those assets (or receive proof of ownership on chain when they acquire new assets)

  3. Enter a contract to tokenize their assets and undergo an assessment for the fiat value of that potential collateral

  4. Use those non-fungible tokens as collateral to apply for a loan

The goal — for this whole process to take place via their mobile device. Of course, such a process would (but doesn’t necessarily have to) rely on self-sovereign identity (which, at the start, could just be a public address with a certain transaction volume) and proof of location (see FOAM), among other elements, but the possibility is REAL.

Lastly, the loan will no longer need to be disbursed from a central authority, and information asymmetry will become a thing of the past. The process of ownership and asset-value assessment can be, in many ways, automated. Of course, guiding fiscal policy will still be necessary to protect both consumers and commercial entities. Peer-to-peer loaning systems could provide liquidity between western localities and rural economies, where the exchange of stablecoin loans for non-fungible token collateral occurs in mere minutes to represent international, collateralized loans. Liquidity to rural areas would no longer be in control by municipal banks, and people could affect fiscal change a world away from each other. Smart contract protocols could then evaluate on-chain history to more objectively determine portable credit scores to best mitigate risk of default or perjury in a proposed transaction. This is the ideal potential for social mobility across the urban-rural gap.

Rural Inclusion & New Economy Market Making

“New markets could be created by rural potentials, which could lead to rise in the employment.” — A. P. J. Abdul Kalam

There are revolutionary markets to be made by the tokenization of non-fungible assets. Increased liquidity in systems gridlocked by operational friction will release trillions of dollars in value into the global economy and, hopefully shift the world’s earning gap for the better. Whichever the case, it has become quite clear that traditional mechanisms of finance do not work for those who need it most, and it is crucial to dis-intermediate these systems so that we, as humanity, achieve equitable access to financial instruments and the lives that they can enable.


Building with Bounties: Co-dependent Social Impact by Robert Greenfield

Blockchain for Social Impact    in the Philippines with Waves for Water Building Filters

Blockchain for Social Impact in the Philippines with Waves for Water Building Filters

Recently, I had the opportunity to explore social impact opportunities in the conservation, luxury fashion, and banking industries in Australia, Hong Kong, and the Philippines. However, what started as a focused trip on developing large social impact partners transformed into a reinvigorated understanding of poverty, people, and humanity’s hierarchy of needs.

Blockchain Can’t Solve That

After exploring the vibrant and developing social impact ecosystem of Manila, our team flew down to Cebu, a southern Philippine state. We ventured off to Inayawan Dump site to distribute goods to village people in the area, collaborating with Glory Reborn, a nonprofit that focuses on providing compassionate and holistic care to marginalized moms and babies within the region.

We trudged through garbage, polluted streams, and swarms of flies only to come to the conclusion that there was no distinction between the landfill and the village itself. Humanity’s hierarchy of needs became evident — food, health, and access to education far outweigh the novel use of cryptocurrency and blockchain alone.

But how could we better identify where technology could be useful in the supply chain to provide the most basic needs in a more efficient, transparent, and accountable way? Oftentimes local and federal government agencies fall short of providing the services impoverished communities need, simply due to resource and budgetary constraints (and occasionally due to for profit business models).

In this brief, I investigate which needs may be best attended to in ecosystems starved of every basic necessity, and foolishly attempt to answer the question, where does blockchain fit into this devastating reality?

Previous Proposals for Bounties Use

In an early proposal made by the Bounties Network, we explored the way in which blockchain-based bounties can reinvent our social impact systems and incentivize action across local networks of nonprofits (and even the affected community members). Advents like Bounties Network, which enable users (individuals and/or organizations) to offer a reward to accomplish a specific task on-chain, have the potential to decentralize charitable incentives for nonprofit entities by requiring a proof of action in exchange for donated funds.

Development of Economic Zones by Activating Community Partners

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Partners Sharing a Platform

The most feasible strategy would be to ‘crowdfund’ resources in support of impoverished communities is to develop local partnerships between organizations that provide different services in the region. Intra-nonprofit communication is lacking within westernized and emerging economies alike. The non-standardization of aid cycles, education around the aid being provided, and programmatic expectations of the communities being serviced can create an inconsistent support experience for those attempting to form some sort of productive constancy in life.

We need to increase the commonality of social impact consortiums likeBlockchain for Social Impact at a local, working group level around the same platform of services. When stakeholders are aligned around a few set of communities (initially starting with one community), the hierarchy of needs of that society can be more consistently attended to. The issue with only disbursing food and water is that those needs only partially attend to community health discrepancies, and don’t attend to aspects of increased social mobility at all. Essentially, villages are kept in a pseudo-reliant state of social immobility, through which mere survival seems to be the glorified outcome.

The shared “platform” can be a standardization of aid cycles, the sharing of data across services to establish working identities for their clients, and even the standardization of aid education when services are rendered. Most likely however, these focuses will only truly align when funding is attached to co-dependent outcomes across nonprofits serving a similar area.

Co-dependent & Hyper Transparent Philanthropy

So what could this platform look like and how could Blockchain better attend to higher priority needs? To better align incentives across local nonprofits servicing a similar region of beneficiaries, co-dependent Bounties developed to efficiently coordinate collaborative & hyper-localized aid. By using payment mechanisms like DAI, nonprofits could receive their philanthropic rewards in a stable form of payment that is still beholden to an automated, escrow-like system, ensuring impact accountability for all organizational participants involved.

More accountable philanthropic disbursement across nonprofit consortiums servicing a locality can hopefully support better outcomes, empowering beneficiaries to climb out of poverty, rather than be supported during a life in it without end.

Developing these nonprofit consortiums by setting up co-dependent, locally focused bounties can potentially ensure

  1. Hierarchy of needs are met by organizations that focus on different categories of aid (food, clothing, water, housing, internet, etc.)

  2. Education is provided in tangent with aid, so that communities are left empowered and not dependent

  3. Aid is hyper-local by requirement of the bounty

Incentives for Better Communities

Once the initial needs are met (food, clothing, water, & housing), providing better infrastructure for the use of Internet can be prioritized. When reliable Internet services are available in under-resourced communities, social entrepreneurs can attend to a different set of problems via blockchain-enabled, user applications.

Models like Service-Backed Tokens become more applicable, as you help beneficiaries learn how to manage their resources and lead their communities by individualizing the benefits of aid. Of course, many other models may fit the mold as well. Individualized bounties within under-resourced communities could work as well, where members are incentivized to keep their localities clean, etc. Of course, the user experience of applications that interface community members would need to be exceptionally intuitive, well tested, and well researched.

Start with Nonprofits First

In the end, we must admit that blockchain alone does nothing for those in need of food and clean water — at least not directly on a day to day basis. What it can do is facilitate better coordination around the strategic funding and disbursement of aid, by first attending to a community’s hierarchy of needs.

By focusing on various tiers of need in a co-dependent fashion, we may be able to include under-resourced communities into our collective vision of a decentralized, cashless, and service-based economy sooner than we think.

Tokenizing Access to Social Services Pt. 2 by Robert Greenfield

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“To give away money is an easy matter and in any man’s power. But to decide to whom to give it and how large and when, and for what purpose and how, is neither in every man’s power nor an easy matter.” — Aristotle

The following brief is a continuation of “Tokenizing Access to Social Services Pt. 1,” and emphasizes the new utility gained from tokenizing social service assets on-chain. Outside of the the economic gains in liquidity, there are also some new cryptoeconomic attributes to the model that (1) make it easier to fund social services in an accountable way, and (2) make it easier to distribute social services on an automated and on-going basis.

Peer-to-Peer Social Service Philanthropy

RFST models also open new funding methods to help support and sustain social services. Instead program’s being completely reliant on the due diligence and consensus of the federal government’s funding, philanthropists could donate funds to the RSFT smart contract, and, in doing so, mint tokens for waiting list candidates to use. In fact, this is exactly how the Bancor model’s Smart Tokens operate — new tokens are minted via the sale of the connecting liquidity token (that which backs the smart token).

As more liquidity is pumped into the system, the system has a greater ability to support the disbursement of services. Philanthropist contributions can be directly traced to the person they’ve helped, and these donors can be rewarded via tax credits for their charity.

The funding model introduces the capability for public services to leverage peer-to-peer funding to offset the sometimes inadequate funding provided by the federal government. Here’s what the donation process could look like:

  1. Web and or mobile application exists to take in donations to support a more generalized, cross-jurisdictional housing assistance fund that backs the minting of housing voucher tokens

  2. Philanthropist can choose which jurisdiction they’d like to contribute toward

  3. Philanthropist’s donation (most likely made in fiat currency) is converted to stablecoin (1:1) or tokenized fiat backing the housing voucher tokens.

  4. Ecosystem fractionally mints housing voucher tokens based on the salary and reported rent of next recipient in the waiting list of that jurisdiction’s housing authority (donation to housing voucher token minting ratio automatically calculated)

  5. New housing voucher tokens disbursed to recipient (once at least 12 months of housing assistance funding is secured from donations, i.e. 12 housing voucher tokens). All transactions are on-chain, making donations easily traceable, even when they are converted to housing voucher tokens

Airdropping for Social Impact

Another unique feature of a tokenized housing voucher model is the ability for housing authorities to disburse assistance to waitlisted recipients as soon as funding is availble using airdrop.

An airdrop for a cryptocurrency is a procedure of distributing tokens by awarding them to existing holders of a particular blockchain currency, such as Bitcoin or Ethereum. There are two ways creators distribute their tokens: selecting random wallets or publishing the event in airdrop lists.

Airdroping assistance can be automated for pre-approved, waitlisted recipients when funding mints new housing voucher tokens, saving the operational expenses and fighting recipient waitlist backlog.

Better User Experience: Abstracting Out the Blockchain

Of course, one major factor to develop a token model like this is to completely abstract out any mention of the blockchain from the user’s experience. Even the traditional representation of ERC20 wallets must be greatly simplified so that consumers can transact if they are sending each other credits or using Venmo.

For the development of this model, a lengthy and in-depth research and design spring is required to ensure that the user experience is one that is as beneficial and simple as the model’s backend operational benefits. A few UX obstacles to overcome are the following:

  • Easy flowing donations from fiat to stablecoin using debit and credit cards

  • Ensuring users never need to set gas for their transactions, and never have to pay transaction fees while transacting on the network

  • Private key management and wallet security to maintain their housing voucher tokens

  • Simple interface so that voucher recipients and landlords can easily transact (send & receive)

  • Simple accounting interface that summarizes statistics/analysis of network’s transactions for housing authorities

Building Sanboxable Use Cases

Of course, this is all great in theory, but the major issue with implementing models like this, particularly in western countries, is the government’s inability to exempt the public use of token models in local sandboxes. Doing so could generate a great amount of insight of how models like this can operate in a federally sponsored ecosystem, creating new policy for the cryptoeconomic world — and new assets for the social service world at large. If we can muster the research and concentration as a community to try these models out, we may develop cryptoeconomic models that further enable humanity’s ability to ensure everyone is fed, housed, and actively able to enhance the quality of their own lives.

Tokenizing Access to Public Services Pt. 1 by Robert Greenfield

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Society’s punishments are small compared to the wounds we inflict on our soul when we look the other way. — Martin Luther King, Jr.

Social services in the United States like assisted housing and supplemental nutrition assistance aid over 45 million people a year. These programs help combat homelessness, food insecurity, and the many systemic factors that stem from a lack of stable housing and a reliable source of nutrition.

Yet still, many under resourced communities continue to suffer from a lack of access to these services due to woefully inadequate federal funding and terribly long waiting lists. Even when the impoverished do have temporary access to programatic benefits like housing vouchers, they are still affected by systematic discrimination, particularly if they’re people of color. The latter sometimes invalidates the benefit of the service itself, forcing the poor into a vicious cycle of false opportunity, where, although their cost of living is subsidized, their access to social mobility, due to where they live and the education they have access to, is non-existent.

So how does the current chaos of tokens relate to aiding the impoverished? Tokenized models, when engineered correctly, can exponentially optimize the traditional system of social services, making them incredibly more liquid, frictionless, and accountable.

The purpose of this brief is to propose a token model that brings increased liquidity to non-fungible markets within the public sector and demonstrate how partially non-fungible tokens, or ‘refungible tokens,’ can make this model work.

What are Refungible Tokens?

The idea of ‘refungible tokens’ was first proposed by billy rennekamp, prompting the following question:

What would happen if an ERC721 NFT (non fungible token) were owned by the address of an ERC20 Bonded Curve/Liquid Token?

Rennekamp’s proposal investigated a model in which you could have a non-fungible asset tied to fungible liquidity — enabling that asset to ‘ become fungible again.’ Simply put, instead of having some unique asset like a CryptoKitty, whose value is completely speculative based on the audience that is engaging with that type of non-fungible asset, we’d have cryptokitties that, although they themselves represent non-fungible tokens (ERC721), those tokens are tied with more liquid, fungible assets (most notably, ERC20 tokens).

Refungible Tokens for Good

The proposed token model is a variant of Rennekamp’s architecture and is more akin to the Bancor Smart Token. The Smart Token is a ERC20 (fungible) token that is connected to another, more liquid ERC20 token. For example, say we create a token called Impact Coin, but it has no liquidity because no one owns it yet. In order to create automatic liquidity, we make it a ‘Smart Token’ and connect its volume to a more liquid token like DAI, making the conversion ration between the two 1:1. Now, when someone wants to mint an Impact Coin to use, they simply sell 1 DAI to the Impact Coin contract, and, in exchange, receive 1 Impact Coin in return. As more Impact Coins are minted, its price steadily increases and vice versa.

A ‘Refungible Service Token’ (RFST) model, takes this approach, but instead it connects ERC721 tokens (non fungible tokens) to more liquid ERC20 tokens in a way where the price point per non fungible asset is dependent on certain independent parameters of its recipient, not the total volume of non fungible tokens minted.

The price of any RFST would be based on parameters common to social service ecosystems, which frequently rely on the service recipient’s income, rent, number of dependents, age, and or disability status. Each RSFT would represent a monthly payment in aid and there can only be as many minted RSFT’s as the token’s backed liquidity can support. Each recipient’s RSFT would be uniquely valued based on the following parameters:

  • Recipient’s Monthly Income (given that all recipients live at or below the poverty line, which is often the case)

  • Recipient’s Rent (given a Max Rent cap per month for all recipients)

Veteran and disability status could provide additional subsidies (i.e. more tokens) via the traditional means of applying to the program(s). Each social service would serve as its own category of RFST and RFSTs from different service categories would not be exchangeable. The price point of RSFTs would be determined by that social service’s benefits formula, which determines how much aid is disbursed based on the aforementioned parameters. For example:

  1. Robby applies for housing assistance, where the Tenant Rent Payment = Monthly Income X 30% and the Assistance Amount = Total Rent — Tenant Rent Payment

  2. If Robby’s monthly income is $1,850, he would pay $555 toward the rent ($1,850 X 30%)

  3. If the total rent for the apartment is $850, the assistance will pay $295 to the landlord on Robby’s behalf, meaning that his RFST are worth $295 each

Of course, this initially proposed method of pricing simply abstracts how the traditional, in this case housing, market disburses assistance. Much more dynamic and economically responsive models are definitely viable in the future with more optimization simulation and overall token engineering.

What Does Liquidity Mean in Social Services?

To take a small step back, we have to define what ‘liquidity’ is in the context of social services.

“Traditionally, liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price.” — Investopedia

Though this definition does hold true, particularly for the disbursement of housing vouchers and supplemental assistance credits, prices for RFSTs are relatively fixed to the recipient, unless the recipient indicates their salary has drastically changed. What is not easy in these types of markets is exchangeability between assets. The “buy and sell” aspects of social service markets, whether it is vendors cashing in vouchers from assistance consumers or it is consumers needing to apply the usage of their vouchers in a different locality, these type of assets are rather operationally inefficient and landlocked to their issuing locality — even at the expense of their underlying fiat value. The latter perfectly fits the definition of ‘illiquidity:’

“Illiquid refers to the state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value.” — Investopedia

Nationally Liquid & Economically Responsive Social Service Markets

Many social service markets are incredibly illiquid because of how non-fungible their services are between different jurisdictions. For housing vouchers, local housing authorities face a litany of problems when attempting to accept vouchers disbursed in different jurisdictions.

Currently, when a family receives its voucher from one housing authority but wants to move to the jurisdiction of a different housing authority, the ‘sending’ housing authority has a choice:

  1. Transfer the family to the new housing authority, which must agree to “absorb” the transfer by issuing one of its own vouchers

  2. Pay the ‘receiving’ housing authority for performing administrative functions such as income certifications, housing inspections, and lease renewals

Many urban housing authorities have agreements with neighboring jurisdictions that they will automatically ‘absorb’ vouchers from each other rather than administering complex billing arrangements. But this arrangement is also undesirable, requiring the ‘receiving’ housing authority to use up a unit of housing assistance that could have served a family on its own waiting list (Margery Austin Turner).

As we can see, the traditional system is exchanging non-fungible assets (vouchers) between jurisdictions at the expense of the value of each of the vouchers, not providing an additional voucher to someone on the waiting list, and the accounting of the transacting housing authorities.

A RFST model makes the exchange of vouchers between jurisdictions fungible and automates cross-jurisdictional accounting between an exponential amount of local housing authorities in contrast to the traditional ecosystem. With increased scalability and the addition of parameters like the consumer price index (CPI), national median monthly income, and even economic indicators from the stock and housing markets, RFST models have the potential to be completely economically responsive in the automation of social services across the country, enabling program recipients to truly live where they want to live, and, thus, take more control over where their family attends school and realizes opportunity.

Radical Transparency & Funding Accountability

Another problem within the traditional social service market is the government’s need to sample test social service programs in various jurisdictions in an attempt to detect fraud and spending discrepancies. These tests are quite costly and more or less randomized given the massive breadth of these programs (active across the country). Since localities usually govern the disbursement of social services to their respective residents, transparent accounting from a federal level is virtually impossible, particularly given housing assistance practices like ‘absorption,’ as described earlier.

The proposed RFST model would automate liquidity calculations between assets of the same service category, which, in turn, would automate the minting and burning of assets to ensure that the maximum number of individuals are supported by the program. In doing so, the federal government could easily audit transactions on-chain and detect anomalies at the jurisdictional level via machine learning. Such practices would exponentially decrease the cost of policing (and the effects of) fraud and serve as a model for radical transparency of public spending.

Future of Public Services on the Blockchain

By increasing liquidity, reducing friction, and emphasizing on-chain accountability, public services potentially have a lot to gain from leveraging crypto-economic assets like RFSTs. Adequate research, token engineering, and user experience development could revolutionize how social services are transacted and disbursed around the world, making it easier to determine how to socially engineer these services to maximize a population’s exit from poverty. Personally, I hope to further develop the model and test it domestically with willing partners to guide more dynamic, and progressive policy development around the use of crypto-economics in America and around the world.

Unbanked for Good: Digital Currency and Self-Sovereign Finance by Robert Greenfield

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In the social impact landscape, “banking the unbanked” has become a popular, if somewhat misguided, refrain. As blockchain technology gains traction globally, and as smartphones reach more and more low-income communities, the horizon of self-sovereign finance is putting pressure on the now commonplace initiative to “bank the unbanked.” Considering that many of the basic services offered by the traditional banking system are opaque, slow, and expensive, the time is ripe for a crypto-economic alternative.

As we look back on the old system and explore the true meaning and the prospect of self-sovereign finance, there are a few key questions to consider:

  • Do we want to expose our most economically vulnerable communities to the risk of operating within the traditional banking system, one that is commonly fraught with incentives to defraud under-resourced populations?

  • Are wide-scale economic monopolies in developing economies a good strategy for economic equality and sustainable development in those regions?

  • Can the cost of being banked be exponentially minimized for current non-consumers, or will this cost simply be levied against the existing consumer base?

  • Can stable token partnerships with incumbent mobile payment networks create a system through which unbanked consumers can establish financial self-sovereignty and control their assets with their phone at any time?

Financial Equality vs. Economic Equality

The definition of “financial equality” is hotly debated in the social impact space, particularly when comparing the developed and underdeveloped worlds. Being “banked” can still be a long way from financial equality, and many draw a hard distinction between financial equality and economic equality––the ability to become socially mobile and enjoy different economic opportunities.

“Financial equality” and “economic equality” are often used interchangeably, which underscores the cultural misunderstanding of both systemic inequality and the subjectivity of need. In an American context, financial equality is more akin to broader access to financial services, rather than economic opportunity. In many westernized countries, bank account creation and yearly income are often used as a financial equality key performance indicator (KPI).

Financial equality, however, is a mere feature of greater economic equality and opportunity, which are oftentimes predetermined by the lottery of birth. Many consumers are born into positions of little or no purchasing power and face discrimination when applying for jobs or loans. They simply cannot afford social mobility.


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In the U.S., approximately 15 percent of consumers — roughly 37 million adults — do not have a bank account (PEW). Many of these unbanked Americans earn less than $25,000 a year. Interestingly, an estimated 21 million of these 37 million had previously held bank accounts, but they exited the banking system because of the high cost of overdraft fees. When asked whether they would like to have a checking or savings account in the future, 77 percent said no. However, without bank accounts, these people are unable to access to lower-cost, mainstream financial services and at a much greater risk of loss or theft of funds.

Cryptocurrencies as a Store of Value

One early and longstanding argument from Wall Street against the viability of bitcoin (BTC) as legal tender is that it is a terrible store of value. A store of value is any form of wealth that maintains its value without depreciating (i.e. gold is a better store of value than milk, which naturally spoils). Of course, if the economic aim of a currency is to preserve value, then many cryptocurrencies fail by that standard. However, the advent of volatility-resistant stable tokens is starting to bring cryptoeconomic-store-of-value alternatives to the forefront.

Initially, Tether (USDT) was the promise child of this effort, but after repeatedclaims of fraud and collusion with the exchange Bitfinex, Tether has effectively disqualified itself from gaining mainstream consideration beyond the cryptocommunity. In theory, Tether receives deposits of US dollars from investors, and then creates an equivalent number of tethers (the platform’s native currency) and gives those tethers to the depositor. These tokens are supposedly backed on a 1:1 basis, but without an audit, it is impossible to know whether the Tether platform has the $2.2B in reserves it claims to have.

So what promising solutions exist beyond Tether? Makerdao’s DAI is proving to be an exceptionally strong alternative and with some of the most mature cryptoeconomic and decentralized structures in place to ensure stability to $1.00 USD. The cryptocurrency maintained a variance of less than 2 percent during the recent January 2018 market downturn. While everything else was losing 30+ percent of its value, DAI leveled out at approximately $0.98. We won’t delve into how DAI maintains stability, but Gregory DiPrisco’s “Maker for Dummies: A Plain English Explanation of the Dai Stablecoin” does an incredible job of decomposing the Maker system.

With continued positive performance, DAI––which is an ERC20 token––could better enable DApps to provide a 1:1 USD pairing for mainstream consumers, making the use of cryptocurrency a backend, operational efficiency mechanism rather than a front-end UX nightmare.

Smartphone Penetration vs. Mobile Payment Growth

Global smartphone penetration has increased steadily year-over-year since the introduction of smartphones to western markets. In fact, about 6 in 10 unbanked consumers in the U.S. have a smartphone. However, despite this increase in access, the use of mobile payments is significantly lower among the unbanked. According to research reports from Pew Charitable Trusts, approximately 39 percent of unbanked smartphone owners have never made a purchase, paid bills, or sent or received funds using mobile payments technology compared with 64 percent of banked smartphone owners. So why is it that unbanked consumers don’t take full advantage of all the features on their smartphones?

A major barrier to entry is the fact that unbanked consumers rely heavily on paper checks and cash for income and expenses, which have limited to no compatibility with mobile payment technologies. Despite the global smartphone penetration, the mobile payment industry is beholden to the constraints of unsustainable bank account expenses (i.e. “the cost of being banked”) and the bank-oriented methods of payment many of these consumers are familiar with. Only by making accounts more affordable and offering easy liquidity for the deposits of cash and paper checks can the mobile payments industry activate unbanked consumers.

A Future of Financial Self-Sovereignty

Establishing liquidity between the traditional banking system and DApps that leverage stable tokens is essential for mainstream adoption of blockchain-based payment technologies.

There exists a “mid-term future” for the prevalence of decentralized technologies where monopolies will play a role in supporting scalability.Blockchain technologists all hope for a universal, trustless environment where we can maximize the ability of under-resourced communities to participate in the global economy, but fierce user experience (UX) constraints must be adequately overcome for under resourced community stakeholders to be able to leverage the advantages of zed technology.

UX obstacles like the complexity of visualizing the use of cryptocurrency for the common consumer––even with something like DAI, which is approximately equal in value to the U.S. dollar––are massive cultural hurdles to mainstream adoption. If credible stable tokens can be backed by traditional banking institutions, so that it’s easy to redeem cash in the real-world and vice versa, the mobile payments industry can leverage a peer-to-peer banking economy where each individual has complete control of their assets in the palm of their hand. Of course, incumbents must be incentivized to provide such liquidity, or entrepreneurs must be clever enough to create ecosystems that can support it. Many banks are fighting to tokenize fiat currencies in an effort to gain the operational benefits of blockchain technology whilst maintaining complete control over the world’s money supply — a world that, ironically, reintroduces the issue of ‘double spending’ via fractional reserve banking. It is doubtful that the traditional banking system would readily empower unbanked communities to become financially self-sovereign.

But we have the technology now to achieve financial self-sovereignty. A decentralized, mobile payment system would ultimately eliminate overdraft fees, because over-drafting funds on the blockchain is impossible. The cost of maintaining a low balance would effectively be zero, and payment for services would be reconciled in an instant. With decentralized models, we can also layer financial products, such as loans, on top of a mobile-forward, self-banked system. We are on the cusp of a future in which we have complete control over our assets, a future in which the speed and cost of transacting is minimal, and in which the freedom and opportunities of true economic equality, and not just financial equality, are guaranteed for everyone.