Blockchain & Microloans | Jack Saba

So, in the public blockchain ecosystem, it's very much Bitcoin and Ethereum are the 2 biggest ones. In permissioned, it would be Ripple and Stellar, which are kind of doing the same thing for different people. They're the payment rails between institutions. So, as we were talking about earlier, where the current system requires intermediaries and reconciliation, and Bitcoin provides peer-to-peer, Ripple is essentially doing bank-to-bank. So, disintermediating the intermediaries. But only for institutions, so allowing institutions to send value back and forth. And in the private blockchain ecosystem, there's a handful, one of which is Multichain. So each one of them—

It's like a multiverse? What's a multichain?

Multichain is just the brand name.

Okay, okay.

So a public blockchain places a premium on anonymity, immutability, and transparency, and not so much efficiency.

The Bitcoin blockchain takes about 10 minutes to I hear that's actually a big pain point of—

It is, and there's a bit of a debate going on right now about how to create efficiencies with it, but it provides security and it does what it needs to do. It'll have some scaling issues, but I think ultimately they'll work them out. In a private block— in a public— no, in a permissioned blockchain, they place a premium on immutability, efficiency, and to a degree, transparency. But not so much anonymity, because you need to be a known individual in order to work with it. In a private blockchain, they really put a premium on efficiency, as well as immutability, and not so much transparency or anonymity.

And so, I know while you were discussing that, you brought up the healthcare system and financial institutions. So, you're talking about applications outside of this Bitcoin, where it originated from. So, we'll start with finances. What are some use cases for the financial markets?

So really quickly, it was interesting when Bitcoin was first released in 2008 and up till about 2013, no one really knew what it was. And then it kind of hit $100 and everyone thought was, oh, that's really interesting, but it'll never really be anything. But then around 2015, banks started looking at the underlying technology, which is the blockchain, and they started looking at it as a decentralized ledger. So a way for different institutions to share the same information and have a succinct record and create efficiencies. So now they're starting to look at it. So within finance, one of the things that I'm really excited about is providing microloans across borders. So microfinance is something that's taken off in certain regions, and it's essentially for those that don't have access to traditional banking systems can get small loans. So right now in Brazil, for example, the cost of debt is 300%. That's ridiculous. It costs us, what, 12% to 24% on our credit cards, somewhere in there.

Yeah.

So 300% is just Not even within several standard deviations of what we're looking at. And there are institutions in, say, in some of these emerging markets where they can only charge 12% locally to their people. They can only provide a microloan at 12%. So CreditDream is a microfinance application based on the blockchain that's trying to provide loans to individuals in Brazil at 60%. So it significantly undercuts the market It provides loans to individuals that they can pay back, and now they can pay for school supplies, they can pay for their school's tuition, they can start a small business, they can do these different things. And it provides other individuals, whether it be people from the United States or institutions from the United States or around the EU, or institutions or microloan societies in emerging markets, to provide loans at higher rates than they would see. So it has the ability to provide— send money across borders in a very efficient way, and you can receive it back. So with that same principle of moving across borders, one of the other really exciting use cases is remittance. So right now, Western Union, if you want to send money to your family back in the Philippines, for example, which is a really great market for remittance, they send a lot of money back and forth over the course of the year.

Pardon my ignorance, remittance is just sending your family back overseas money?

Yeah, it's sending money across borders. So it's predominantly used from individual to family. As they come to new areas, they start working, they send money back. So in the Philippines, it's a really large market for this, but right now Western Union is the biggest player. And because there's no way for them to really, for people really to send money through traditional financial institutions and there's no alternative way, someone like Western Union charges 12 to 24% for doing that. So you send $100, they're taking $24. That's outrageous. So the technology can disintermediate them and now people can send money directly from me to you. And directly across borders back to your family. So remittance is a really great use case for this technology.

Is the reason that they're taking so much of a percentage is because with the financial, with the traditional means, there's all those different stops that each need to take a little cut of it? Or is it just because of greed?

So in particular with Western Union, they have a really strong network amongst themselves. So if you go into a Western Union, you say where you want the money to go and who's going to be receiving it, and they just have it on the other end. So they don't need to deal with the intermediaries like financial institutions would and like we would, because we— I can send money from my bank account to your bank account. But they're really one of few players in the ecosystem that can do it. So it comes down to greed.

Got it.