This article is part of the “PoS networks from an ESG perspective” series. Click on the following link to learn more about Environment.
There are 1.7 billion unbanked people in the world lacking documents that prevent them from accessing basic financial services. Proof of Stake and DeFi applications can help break these financial barriers eradicating social inequalities.
For instance, in El Salvador, 70% of citizens have no bank account. Those living abroad sending money back home see their salary halved due to unreasonably high transaction fees. To relieve the country from its financial burden, and with a BTC reserve of $20 million, the El Salvador government deemed Bitcoin a national currency. Although it is too early to gauge the effects of such an economic pivot, it proves how public bodies and institutions gradually embrace the crypto economy.
By accelerating the adoption of cryptocurrency in low-income countries, we can drastically boost financial inclusion; and by reducing cross-border fees and facilitating fast remittances, we can lower operational costs significantly. Blockchain offers mutual benefits to the unbanked population and traditional financial institutions that typically absorb redundant micro-transaction costs.
For instance in Africa, Microwork, a task performed via mobile phone and outsourced to a decentralized online workforce, has captured the interest of the younger African population. Microwork provides a daily earning of nearly $7, compared to an average daily urban income rate of $4. Microwork has a huge potential in low-income countries, but remittance costs have largely limited its uptake. In Kenya, for example, the average remittance costs are nearly 5%, which translates into a potential loss of nearly $100 million per year.
Crypto payments and decentralized finance (DeFi) products have the potential to shift such a paradigm by guaranteeing democratized access to finance and by enabling anyone to participate in the ecosystem, unreservedly and without discrimination. Unlike most sought-after positions in traditional corporations, PoS networks have no entry barriers; anyone in the network can potentially earn and access digital assets by completing tasks rather than by their purchasing power. The engine of PoS privacy, inclusivity, and diversity factors is based on encryption which allows shielding users’ identities. AML/KYC policies, on their hands, ensure each actor’s identity involved in the network is verified.
The Celo Ecosystem
Figment supports Celo, an EVM compatible Layer 1 protocol, and CELO is a great example of how Proof of Stake can be used to tackle monetary gaps across societies, opening financial services to anyone with a smartphone. Celo uses the Proof of Stake consensus mechanism and an automatic daily carbon offset, making it the world’s first carbon-negative blockchain. To date, Celo has already offset more than 2,285 tons of CO2.
Its open-source infrastructure consists of more than 1,000 projects. The first-ever application built on the network was the Valora wallet. Instead of complex crypto identities Valora uses mobile phone numbers as public keys making it easier for non-crypto native people to exchange cryptocurrencies and participate in Web 3 economies. During the COVID-19 crisis in the Philippines, the Valora wallet was used to deliver financial aid to 3,500 entrepreneurs in the country providing access to groceries, medicine, and other vital goods.
DeFi For The People is another project built on Celo aimed at democratizing access to basic financial services. A $100 million fund dedicated to developing Celo-based DeFi apps enabling users to lend, borrow and trade digital assets or earn passive yields through staking. A CELO project, Climate Collective, is replying on their communities and companies to support impactful projects while also advancing protocols’ interoperability for a more inclusive Regenerative finance (ReFi) ecosystem.
Many working communities around the globe can benefit from distributed ledger technology. By tracking products’ journey from source to end-point, transactions occurred, and the environmental footprint of any given supply chain, it is possible to enforce more responsible production and distribution of goods, while also prompting more conscious consumption habits.
Regenerative Finance
Regenerative finance (ReFi) is one of the fastest-growing sectors in the Web 3 space using capital as a systemic tool to solve problems at the core of our societies and natural environment. The goal is to offset the negative impact of human actions using financial returns as a by-product. In ReFi, profits are being used to incentive progress, shared prosperity, and fairer social and environmental practices. Capital, in the form of investments, loans, grants, and other financial instruments is allocated to maximize the success of community-led and purpose-driven initiatives.
Many ReFi-based projects like Toucan and KlimaDAO are tackling climate change by tokenizing carbon credits; others, like the Gitcoin community, leverage smart contracts and decentralized technology to enable an open web where the co-creation of open-source projects can be beneficial for the society at large.
Gitcoin, which Figment has recently funded, is another example of coordinating and facilitating open source developments. Its crowdfunding initiative, the Gitcoin Grant, uses quadratic funding for its crowdfunding initiatives working as a mesh network of small contributors.
Over the past years, quadratic funding has proven to be the optimal way to fund projects in a democratic community. Using a mathematical formula, it allocates capital in a fair, logical, and distributed way to support the very best projects in the space. As a result, quadratic funding has gained a lot of traction amongst the Proof of Stake community raising nearly 4 million dollars in campaigns.
