04/02/2019

América Economía: Smart Contracts and investment

When blockchain democratizes access to capital.

One of the most interesting ideas around the blockchain is the opportunity to create computer contracts or smart contracts. The idea: automate and give accuracy to legal agreements that are inefficient today.

To understand its value, it is important to understand that the legal agreements that humanity has used hundreds or even thousands of years ago, are made based on codes and legal jargon that since the Roman Empire, seek to represent principles and set procedures that will bring the society to administer justice to all citizens.

However, this administration, on many occasions instead of bringing people to live in a fairer society, distances it, either due to the slowness of the processes, the arbitrary interpretations of the codes, the costs of sustaining a process, the bureaucracy and human errors derived from it. If we consider the discussion of a just society, it immediately refers us to the concept of equity, equal opportunities and access to capital, a topic in which Latin America has proved to be the perfect example of everything that should not be done. Especially if we refer to the financial markets.

Since there are financial markets there are barriers to access investment possibilities. The first is education: not everyone is in a position to launch their money into assets that they can not see and whose returns are not immediate but well ahead in time. But, secondly, there is a series of barriers that are both bureaucratic - geographic limits, requirements for various documents - and monetary - a minimum investment floor -.

The other side is set in those who need to make a capital, those who are willing to put their time and knowledge to carry out projects with high need for liquidity. An example that can help us to exemplify is that of a land transport fleet in the United States that already has a significant number of trucks operating and are at the right time to expand their market; However for this they need to make some more trucks for their fleet and do not have all the capital to take advantage of the opportunity.

The traditional process to obtain capital would be to visit banks and investors, either to acquire debt or to look for partners that will keep a percentage of the company, they will modify the policy in the decision making, not to mention that if it is only a few trucks , the business will seem irrelevant.

Here appears the possibility of looking for small investors through investment platforms on blockchain, where the public access business opportunities in an agile, secure and without having to be overwhelmed by the famous "small girl".

The blockchain technology allows to ensure the immutability of the information contained within it. Thus, all contracts that "sign" the investors of the trucking company are impossible to change, so the risk is reduced exclusively to the management.

The case of the trucking company is applicable to all types of investment : -business real estate, shows, work machinery, no matter the sector or sector, the important thing is to have the opportunity, the small investor and a solid process.

In this way, the range of options that the average Latin American had to invest , passes from a few policies and fixed terms, where he will hopefully protect his capital (in the case of Argentina, directly loses), to a range of options as varied, Not only will it give you the opportunity to generate greater profits, but it can directly impact the development of companies that are interesting to you.

This way, the access to the investment in percentages of physical assets is solved and that is why the minimum investment floor can be very low. This welcomes those people with a desire to invest who had not launched to face the various difficulties that had to overcome.

What at the beginning was only considered a fad by some has become the hope for a series of very varied processes, not only financial transactions, but the registration of property, medical history, or professional certifications. This technology has the capacity to make markets more efficient for the provision of goods and services. And, in addition, it guarantees greater transparency and inalterability in the transaction register.

For all this is that the use of blockchain is something that is beginning to add momentum in the region. In fact, in October 2018, the IDB Lab - the innovation laboratory of the Inter-American Development Bank Group - announced the launch of LAC-Chain, a new alliance to promote the development of a blockchain ecosystem in Latin America and the Caribbean including, efficient and safe for everyone.

* You can read the full article here: Press Release



*S.E.U.O.