A Brazilian fintech company, Tanssi, is rolling out a government-backed blockchain project involving microlending to farmers in São Paulo, following the pilot of a local currency in the city of Santo Antônio da Alegria.
During an interview with CoinDesk at the Blockchain Conference Brasil in São Paulo, Tanssi’s Director of Business Development, Luis Dal Porto, revealed that the microlending service will be launched next month, with a mobile application for its use already live.
The project is backed by the São Paulo City Council and offers up to R$15,000 ($2,800) in quick loans to small-scale rural producers. The system runs on a blockchain infrastructure built with Tanssi, which allows developers to create special blockchains or ‘appchains’.
Although blockchain technology is used in the service, this is only done on the backend.
“In practice, the blockchain is not even seen. It is a mobile app that they offer to manufacturers. They also have physical payment terminals,” Dal Porto told CoinDesk. “It’s a completely closed ecosystem that they offer to gain more control over how the credit is used and to limit the risks.”
The fintech behind the project chose Tanssi over public blockchains such as Ethereum or Solana due to performance and cost concerns, Dal Porto added. Because public resources were involved, the team prioritized predictable transaction costs and reliability, two things that are harder to guarantee on public, permissionless networks, which have historically experienced issues with congestion, volatile transaction costs and, in some cases, downtime.
“A classic problem with any public blockchain is that there are moments of bottlenecks, moments of more expensive transactions. This takes away something that is very important to them: predictability,” explains Dal Porto. “They need to have the predictability that they will spend that specific capital, and it won’t be more than that. If they charge 5% and if the fee goes up or down, for example, that’s a cost they can’t predict.”
Although Brazil’s central bank has halted full deployment of its Drex digital currency, the project’s backers expect municipal and private blockchain initiatives to continue to grow in parallel.
Announced last year, the Santo Antônio project uses a token system to distribute municipal aid, such as food benefits, through a closed ecosystem that limits how and where the money can be spent. The tokens, accessed through a mobile app or physical payment terminals, are programmed to block purchases unrelated to the intent of the assistance, such as gambling on sports betting apps.
São Paulo’s microloan program is expected to go live next month.