š¾ How Web3 is changing the way the unbanked get loans + Web3 101 concepts
In Newsletter #1, we highlight and learn from QuipuMarket, the DeFi for the informal economy in Latin America.
Welcome to the first Web3Founders newsletter - I am thrilled to have you here!
The goal of Web3Founders is two folded:
ā”ļøFor Web3 entrepreneurs building the future to highlight their technology and business, for their fellow builders to discover their peers and for Web3 curious minds.
ā”ļøFor newbies to learn new concepts from those conversations we created the Web3 101 section at the bottom of this newsletter. Understanding Web3 concepts as a nontechnical person is freaking difficult. I will use these conversations as triggers to explain basic concepts simply.
Web3 Founders, Episode 1: QuipuMarket. Using Web3 to Leverage the Informal Economy
I sat down with Mercedes Bidart, Founder & CEO of QuipuMarket an early-stage DeFi startup with 10,000 users, named by Fast Company as one of the worldās 50 most innovative companies of 2022.
Mercedes is a passionate entrepreneur with a humongous mission: to close Latin America's 1.12 trillion funding gap for micro-entrepreneurs. During her masterās at MIT, Mercedes and her co-founders started deep diving into the obvious but invisible problem of access to credit for the informal economy. Micro businesses are the backbone of developing countries, and they cannot grow due to the inability to get a loan - and when they do it is incredibly expensive (up to 73% in interest in some countries š¤Æ).
This is a historical problem that is the perfect scenario to be solved by blockchain technology and DeFi. In this 11 minutes Episode, Mercedes and I talk about:
The problem they are solving
Their users and how Quipu Market transforms their lives
Quipu Marketās tokenization and protocol vision
Two Exceptional Web3 Concepts from this conversation
š¼ An NFT as a āDigital Financial IDā
Quipu uses NFT technology to keep its usersā financial IDs. With this NFT, users can own their āalternative credit scoreā as a digital financial ID without needing a Credit Bureau to assess it. Assessing a credit score has two main problems:
It costs money as every time a financial institution wants to lend, they need to pay the Credit Bureau to access the individualās score.
It lets many people out of the system (and these are the users that Quipu targets).
This NFT is revolutionary. Imagine the ability to track your financial record in a trustable and portable way, at any time, and plug it into other financial institutions to verify your financial identity. Suddenly, you and no one else own your Financial Identity.
šø Communal tokenomics
Quipuās vision is to allow everyone to invest in these micro-entrepreneurs. That means you and I, from wherever we are in the world, can allocate our investments to Microentrepreneurs in Latin America by buying a Quipu Token. The micro-entrepreneur gets real cash fast and at affordable rates, and we (the investors) receive an interest-bearing token that increases its value as loans are repaid.
Quipu takes care of the liquidity pool (all the investorsā money) and allocates the micro-loans to borrowers based on an AI credit score built using the information on usersā digital behavior on the app, sales, customersā scoring, sociodemographic, and so on.
Moreover, to incentivize the Quipu Token, the micro-entrepreneurs that receive the loans will get rewarded with Quipu Tokens as they repay their loans, get new referrals, and have an updated catalog in the marketplace, and so on.
Isnāt it beautiful? I know, I want my Quipu token too, but we just need to wait a bit more - itās in their roadmap for Q1 2023.
If you want to know more about this powerful business, go to their website.
To get more of these Web3 foundersā snackable videos and interesting concepts every two weeks, subscribe to the Web3 Founders newsletter.
WEB3 101. Fundamental concepts in nontechnical lenses
Before deep-diving into this section, here are the 2 rules to learn about Web3 as a non-technical curious:
Be consistently scrappy: you will find new words every two phrases. Keep reading as the word will appear again, and you will read a definition and understand it a little bit better.
Expose yourself by being curious: No question is a stupid question, and the more you ask, the more you will understand. Read, watch videos, ask people, and try to explain it to a friend. Ingesting the data in different form and trying to explain it is the best way to learn it.
That being said, today we will review 2 concepts:
1ļøā£ Web3 explained in the linked post
2ļøā£ Decentralized Finance or Defi
In this episode, we learned that Mercedes is building Decentralized ābankā. What that does mean?
Decentralization is a concept that changes 180Āŗ how we transact money today, that is centralized. Most of us, have a bank that keeps our money, and each time we want to transfer it to another bank, the banks does it for us. And how does that work in reality? Banks have a āspreadsheetā with all the transactions and by the end of the day they ānet outā all the assets and liabilities (all the money they owe and borrowed), and if there is a difference, they move the money. This way of finance is ācentralizedā meaning that it has an intermediary.
Blockchain technology changes that logic. It allows us to transact WITHOUT the intermediary, aka āthe bankā, because that āspreadsheetā that I mentioned before is on the blockchain, and therefore, transparent. This means that everyone can see every transaction and if anything changes, it will be transparent and we will all see it1. Therefore we created digital currency or cryptocurrency that can be transacted without a bank. This is how protocols like the one Quipu is building, can eliminate intermediaries and allow people everywhere to invest in microentrepreneurs directly. Therefore, microloans donāt come from a bank but direct from peopleās digital wallets.
Iām sure that even in this explanation there are a few words you did not understand: protocol, blockchain, cryptocurrencies. Be curious and Google them. Try to understand them. You will need to read it repeatedly to internalize and connect them. Web3 101 section will keep covering them, one step at a time.
If you made it until here, Iād love your feedback in the comments.
If you are interested in understanding HOW that happens, this 8 min video explains blockchain a little bit deeper.