Rootstock is Focused on Using Bitcoin for Financial Inclusion
Ethereum has gained a lot of attention over the past few years due to the sci-fi-esque use cases of the technology that are often touted by its biggest supporters. As a platform for smart contracts, Ethereum is often viewed as a revolutionary technology that could completely reshape how the world works through the use of decentralized autonomous organizations.
Rootstock is another smart contract platform that has decided to launch as a sidechain to Bitcoin rather than creating their own, new cryptocurrency. For them, the name of the game is financial inclusion.
Sergio Lerner is the co-founder and chief scientist at RSK Labs, which is the company building the Rootstock blockchain. He was recently interviewed by Brian Fabian Crain and Sébastien Couture on Epicenter Bitcoin, and he shared his thoughts on what people will be using Rootstock for in the near future.
Bitcoin is Only the First Step
RSK Labs is based in Buenos Aires, Argentina, and the company is aware of the issues related to financial inclusion and financial freedom throughout Latin America. It is their intention to help the billions of people around the world dealing with these issues and give them access to modern financial services.
“What I see, especially in Argentina, is that we have no trust in banks, we have a history of capital controls that do not allow people to move their money, and have numerous stories of people trying to move their own money from their own accounts and having trouble doing that,” Lerner stated in his recent Epicenter Bitcoin interview. “I think that Bitcoin has shown a lot of people here that there is a way escape the controls that basically restrict the freedom of people.”
According to Lerner, Bitcoin has illustrated the usefulness of this sort of technology in places like Argentina. “Since we live in an underdeveloped country, we’ve seen that there are billions of people that do not have access to bank accounts or they don’t even trust banks anymore because of the different defaults we’ve had here in Argentina,” stated Lerner.
In the past, the popularity of Bitcoin in Argentina has been hyped by various mainstream media outlets. Having said that, those who have worked on Bitcoin projects in Argentina, such as two of the developers behind Streamium, have claimed these stories are overblown. RSK Labs plans to bring those who aren’t even interested in Bitcoin to a new P2P financial system.
Rootstock Enables Financial Inclusion
According to Lerner, the main thing that brought the RSK Labs team together in the first place was the desire to provide more financial inclusion to Latin America. “We think that a smart contract platform essentially provides financial inclusion,” Lerner stated. “The possibility to transact at lower fees and to allow people to be their own bank using smart wallets [is our aim].”
“[Financial inclusion] is our main goal, and . . . I think this will be the main use case,” Lerner added later in the interview.
RSK Labs is focused on solving real-world financial issues that affect billions of people around the world — not just in Latin America. “The people who are really going to benefit from the RSK platform are people who have probably never heard about cryptocurrency,” said Lerner.
While Lerner is excited about possibly solving issues of financial inclusion in Argentina and elsewhere, he was not dismissive of the more futuristic use cases, such as decentralized autonomous organizations, that are often touted when people talk about Ethereum. In his view, providing financial inclusion is simply the best use of a smart contracts platform right now.
The P2P Financial System
Although Lerner did briefly mention the concept of bringing in financial institutions to create microlending platforms with Rootstock, there weren’t very many other specifics brought up in the interview in terms of how this sidechain to Bitcoin will enable more financial inclusion. Having said that, RSK Labs Co-Founder and CEO Diego Gutiérrez discussed this with Trace Mayer on an episode of the Bitcoin Knowledge Podcast earlier this year.
“We can actually build a P2P financial system where different actors can act as issuers, collateral providers, and fulfill different parts of what the banking system does today,” Gutiérrez told Mayer.
Gutiérrez talked more extensively about issuing fiat-denominated assets on the Rootstock blockchain. “You need a pegged asset to the local currency, and without a more powerful programming language, you cannot do that,” he argued.
According to Gutiérrez, a pegged asset would basically work by tying up cryptocurrencies in a smart contract and then issuing fiat-denominated tokens (such as US dollars or Argentine pesos) based on the collateral in the smart contract. The collateral held in the smart contract could be much larger than the issued assets to guard against the volatility associated with cryptocurrencies.
Although Bitcoin is already attractive for avoiding economic restrictions in many countries around the world, these pegged assets could be a critical part of a new, P2P financial system. Of course, a token pegged to the US dollar is not the same as a real US dollar. These sorts of schemes have failed in the past. The world will have to wait to see if someone can build a proper system on top of Rootstock.