Despite their obvious applicability, social currency has yet to be fully labeled in the context of blockchain use cases.
The final cryptography cycle saw various experiments using this concept, but these attempts have not elevated to mainstream consciousness as they hit barriers to product market conformance and regulation.
However, Brazilian builders believe they have the right elements to deploy blockchain-based social currencies in the real world, especially in communities that already have a tradition of adopting such alternatives.
The new partnership between ChainLink, Plexos Institute and Edinheiro Insitute aims to bring greater financial services to underserved communities across the country by introducing a blockchain layer on top of these existing social currency networks.
Community Currency: As old as civilization
Social currency is the same length as human civilizations and is usually designed for acceptance and use by certain people for specific purposes within a particular geographical region or online community.
Consider the “meal dollars” that were issued to university students as part of their meal plans. Students can redeem funds for meals on campus and on participating restaurants on their neighborhood, but they cannot use them in the next town.
However, blockchain technology makes it very easy to build, transfer and burn currency (anyone with basic skills can launch new tokens in Ethereum or Solana), but looking at other types of blockchain applications, I don’t see much real-world experimentation.
Early social token platforms such as roles and rallysers allow creators to launch their own tokens, reward their followers and encourage engagement. These platforms have achieved some success, but ultimately they did not pan out due to issues that fit the regulatory and product market.
Other projects such as Friends with Benefits and Seed Club are also experimenting with social tokens with community governance capabilities.
Crypto Media Company’s Coindesk experimented with a Social token A unique desk called the 2021-22 desk. Tokens will serve as loyalty rewards for participation in activities with Coindesk Conferences and may be redeemed with NFTs and other types of SWAG and exclusive access.
Brazil as a prototype?
Can blockchain-based social tokens find a home in the “real world”? That’s what Brazilian local builders think.
That’s because Brazil is already home to over 180 social currency experiments ongoing over 30 years. These are facilitated by the Edinheiro Institute, a platform where communities can issue and redeem currencies in a burnt-up legal framework.
These currencies are used to distribute social aid and benefits, promote local commerce, stimulate local economies of cash, and provide economic access to people and businesses at the boundaries of traditional banking systems.
Camila Rioja, president of Plexos Institute, is leading the initiative to introduce blockchain into these existing currency networks.
In that first experiment, alongside Chainlink and Edin Hairo, Plexos creates a new blockchain-based social currency Aratsu Indialova is a small community in the northeastern region of Brazil.
Rioja said the concept of social currency makes sense in this scenario.
“This is not a new startup idea. It’s an existing functional ecosystem that has been working for over 30 years. Our job is not to reinvent the wheel, but to bring transparency and modern governance to proven models.”
Strengthening the local economy
Unlike speculative cryptographic tokens, Aratsu And other social currencies in Brazil are controlled by local municipalities, supported by local banks and designed with legal structures that prioritize local autonomy, locking them in a 1:1 to Brazilian reality.
The revenue generated through trading fees (usually 2-3%) is reinvested in local funds rather than extracted by a global payment processor.
“This is money that stays in the community. It’s not flowing into a visa or Mastercard,” explained Rioja.
“It will be distributed locally and strengthen everything from small shops to women-led businesses Shellfish (Woman involved in the harvesting of shellfish) of Indiaroba. ”
Why blockchain?
Why implement blockchain in formulas if existing systems function properly?
The simple layer is that blockchain adds a new layer of transparency and efficiency. In this case, the ChainLink runtime environment serves as a secure connective tissue that allows for functions such as automated reporting, compliance with Brazilian data protection laws, and new forms of community governance regarding how funds are distributed to the community.
Thomas Trepanier, Head of Business Development Latam & Canada at ChainLink Labs, said in a statement that ChainLink can bring transparency, accessibility and connectivity to Brazil’s social currencies.
João Joaquim, coordinator of the Edinheiro Institute, reflected that.
“By integrating the ChainLink standard into Edinheiro’s already proven systems, it demonstrates that cutting-edge technology can enhance what is most important: a solidarity economy with people.”
Adding a blockchain layer to these social currency systems will ultimately open the door to gaining sophisticated products that are effective with more programmers and smart contracts, explained Rioja.
While community currencies already distribute benefits such as housing support and food subsidies, “Blockchain allows you to track these flows, publicly validate them, and start thinking about new financial primitives like credit pools, microloans, or real estate financing.”
However, as the legal framework currently determines how funds are paid, such sophisticated use cases require legislative reform, but blockchain integration is the first step towards these objectives.
