Despite their clear applicability, social currencies must still be fully explored in the context of blockchain-use cases.
The last crypto cycle saw a variety of experiments with the concept, but these attempts came across in product market fit and regulatory barriers and were therefore not noticed in regular consciousness.
Builders in Brazil, however, think that they have the right ingredients to use blockchain -based social currency in the real world, especially in communities that already have a tradition of adopting such alternatives
A new partnership between Chainlink, Plexos Institute and the Edinheiro Institute wants to bring larger financial services to disadvantaged communities in the country by introducing a blockchain layer on top of these existing social currency networks.
Community -currency: as old as civilization
Social currencies have been around for as long as human civilization and are usually designed for acceptance and use by specific people for specific purposes within a specific geographical region or online community.
Think of “Dining Dollars” issued to students as part of a meal plan, where students can cash in the funds for meals on campus or in participating restaurants in the area, but cannot spend them in the next city.
Although blockchain technology makes it fairly easy to mint, transfer and burn currencies (anyone with basic skills can launch a new token on Ethereum or Solana), we have not seen too many real world experiments compared to other types of blockchain applications.
Early social token platforms such as Roll and Rally let makers launch their own tokens to reward followers and stimulate involvement. Although these platforms achieved some success, they did not end up in the end because of problems with the legal and product market.
Other projects such as friends with benefits and Seed Club have also experimented with social tokens with a community management function.
Crypto media company Coiindek experimented with a social token From his own called Desk in 2021-22. Tokings acted as a loyalty reward for participation in activities at Coindesk conferences and could be exchanged for NFTs and other types of SWAG and exclusive access.
Brazil as a prototype?
Can social tokens -based social tokens find a home in the “real world”? Local builders in Brazil think so.
That is because Brazil is already home to more than 180 experiments with social currencies that have been going on for the past 30 years. These are facilitated by the Edinheiro Institute – a platform with which communities can issue and exchange currencies with a ingrained legal framework.
These currencies are used to distribute social assistance and benefits, to promote local trade, to stimulate local economies in cash and to provide financial access to people and companies on the edge of the traditional banking system.
Camila Rioja, president of the Plexos Institute, leads the initiative to introduce blockchain into these existing currency networks, which, more importantly, are supplied with already existing consumers and traders.
For his first experiment, Plexos, in addition to Chainlink and Edinheiro, creates a new blockchain-based social currency called Aratu In Indiaroba, a small community in the northeastern region in Brazil.
Rioja told me that the concept of social currencies in this scenario is logical, because the model has already been proven locally:
“This is not a new startup idea. It is an existing, functioning ecosystem that has been working for more than 30 years. It is our job not to reinvent the wheel. It is to bring transparency and modern administration a proven model.”
Strengthening the local economy
In contrast to speculative crypto -tokens, Aratu And the other social currency of Brazil is linked to 1: 1 to the Brazilian Real, governed by local municipalities, supported by local banks, and designed with legal structures that give priority to the autonomy of the community.
Income generated by transaction costs – usually 2-3% – are re -invested in local funds instead of extracted by global payment processors.
“This is money that stays in the community. It does not flow to Visa or Mastercard,” Rioja explained.
“It circulates locally and strengthens everything, from small stores to women led companies such as the Marisqueiras (Women involved in harvesting shellfish) in Indiaba. “
Why blockchain?
If the existing system works great, why would you introduce blockchain in the comparison?
The simple layer is that blockchain add new layers of transparency and efficiency. In this case, the Runtime environment of Chainlink acts as a safe connective tissue that makes functions such as automated reporting possible, compliance with data protection laws of Brazil and possibly new forms of community management about how funds are distributed among the community.
Thomas Trepanier, head of Business Development Latam & Canada at Chainlink Labs, said in a statement that Chainlink is uniquely capable of bringing transparency, accessibility and connectivity with the social currency of Brazil.
João Joaquim, coordinator at Edinheiro Institute, repeated that:
“By integrating the Chainlink standard into the already proven system of Edinheiro, we show that advanced technology can strengthen what is most important: people and the solidarity economy.”
Adding a blockchain layer to these social currency systems ultimately opens the door for more programmability and advanced products made possible by smart contracts, Rioja explained:
Community currencies are already spreading benefits such as support for housing and food subsidies, but “With blockchain we can follow those flows, public validation and start thinking about new financial primitives: credit pools, microloans or even financing of real estate.”
However, legal frameworks currently determine how funds are paid, so any advanced cases such as these would require legal reforms, but blockchain integration is the first step in the direction of these objectives.