In a week filled with discussions, building, and excitement, ETH Rio brought together crypto-natives and crypto-curious from all over Latin America and beyond to exhibit what has been brewing in the region.
Latin America presents a unique opportunity for crypto and Web3. The continent’s history has been turbulent and the majority of people here know all too well what it feels like to get “rugged” by their governments whether it be through rampant inflation, restrictive monetary policy, or blatant corruption. Yet, with a combination of a large online population, a growing pool of talented developers, and the desire to improve their situation there is fertile soil for crypto and web3 to take root.
Many of the industry’s most influential figures are noticing this. Binance Founder and CEO CZ made a surprise appearance at the conference to announce the exchange’s plan to expand into Brazil. CZ is meeting with government officials in São Paulo and Rio de Janeiro as he eyes where to set up shop for his Brazilian headquarters.
Binance will face competition from entrenched incumbents such as Mercado Bitcoin and Mexico-based Bitso, both unicorns that collectively have about 7 million users. In addition, heavyweights Coinbase, Crypto.com, and others are attempting to expand in the country, too.
None of this should come as a surprise. With 215M people, Brazil is the largest country in South America by far. Brazil, of course, is also the No. 1 Portuguese-speaking country in the world, three out of four fluent individuals. . The effect of being the center of the lusophere means that Brazil has built a unique cultural moat around itself that has cultivated a distinct, vibrant culture but has also created a strong tendency to look inward.
Talking to a number of attendees at the conference, the primary mantra that I heard was that “Brazilians build for Brazilians.” Although Brazil has a giant market, it oftens finds itself having a local mindset. This line of thinking was a major reason why Argentina-based exchange Ripio acquired the second-largest exchange in Brazil, BitcoinTrade, in order to gain a foothold in the country as well as expand its OTC operations here.
Brazil’s situation, both culturally and monetarily, is different from its Spanish-speaking neighbors. With smaller populations and a lack of a language barrier they share a similar attitude when it comes to building. Furthermore, the varied economic situation in each country affects how the populations interact with cryptocurrency. Relative to its neighbors, Brazil has much less inflation and many who hold crypto see it as an investment. Meanwhile, neighbors such as Argentina and Venezuela suffer from chronic high inflation. This uncertain environment has spurred these citizens to prioritize the immediate future and utilize cryptocurrency for its practical use as a currency.
For Brazil, the immediate challenges it faces when it comes to building in web3 are how to look beyond its insular mindset and how to better maintain talent. In this regard, I was able to interview one Brazilian founder who is taking this challenge head on, Pods Finance co-founder Rob Silva Jr.
Pods Finance is a decentralized options-AMM and they originally launched in 2020. The founders asked themselves, “Why can’t novel innovation happen here in Brazil like it does in Silicon Valley or other places in the world? What needs to happen in order to make this a reality?”
This is one of the reasons why Robert decided to build an options protocol which at the time was an unexplored area of DeFi. The core team is currently made up of five people, four of whom are Brazilian, and have made significant strides in advancing options. The protocol was the first to code the black-scholes equation, a mathematical model used to price options on-chain which has gone on to be adopted by other options protocols.
Regardless of location, Pods, like many options platforms, face challenges in the immediate future. For one, options have not seen the same traction as decentralized spot or margin protocols have. Several reasons account for this but the main ones include the education curve the retail users face when it comes to derivatives, a preference to degening over hedging, and an advanced/institutional customer base that still prefers interacting with options on centralized platforms instead.
For adoption, it’s a matter of patience to resolve those issues as well as making it easier to utilize options in tandem with other DeFi money legos. Examples that have been discussed in the past have included attaching a call option to yield farming programs to incentivizing holding and attaching an option to a concentrated liquidity position to hedge volatility.
As Pods continues to position themselves as a viable money lego to the world, Robert understands that it’s still important to keep open channels of communication at home to inspire the next generation of home-grown Brazilian DeFi/Web3 projects.
A few, I am happy to report, are already starting to manifest. One particular platform, DeFi Basket, allows users to construct a DeFi portfolio in a single transaction and manage it as an NFT. As inspiration for cultivating a culture of innovation at home, Robert cites India-based Polygon as an example. The L1 has made an impact worldwide yet maintains vibrant lines of communication with the wider Indian blockchain community.
Pods and DeFi Basket were not the only homegrown protocol from Brazil I was able to learn about. Projects that caught my eye included Detrash, a DAO that is building an incentive system for waste collection and Play4Change, a guild that is onboarding Brazilians for the first time into Web3 through P2E games. Waste management has been a tricky issue for Brazil and experimenting with novel ways to incentivize recycling will help with both cleaning up the country as well as onboarding people into Web3. For Play4Change, P2E is merely the first step of the Web3 tunnel for players with the goal being to financially empower users who have been previously disregarded from the existing financial system.
Both of these projects align with what Play4Change community lead Luiz Haddad was espousing during his speech at the beginning of the for regenerative systems to become the standard in Web3, a step further from merely being sustainable and a complete 180 from the extractive systems that characterized the world of Web2. He goes on to say in order to build parallel systems, they must be completely novel from the ones that preceded it and require a complete change in mindset and attitude when interacting with them.
Brazil is a place that I have felt a personal connection with since first stepping foot in the country eight years ago. I have traveled here in different capacities whether it be to study, vacation, or for work. There is no denying that the energy here is like nowhere else in the world, it’s something special that is hard to describe in words which is a reason why I always find myself coming back here.
Yet, Brazil does not come without its problems. A history of corruption, rampant inequality, and inefficient bureaucracy have led many of the country’s brightest to seek opportunities elsewhere. I remember hearing an old saying about Brazil back in college which went “Brazil is the next great country and always will be.” But with robust levels of crypto adoption, can Brazil embrace DeFi and Web3 and become a major force on the world stage?
The key difference in Brazil is that adopting those parallel systems is much more of a pressing need than in the developed world. It’s a matter of educating and onboarding those who can benefit from it the most while fostering an environment conducive to building better financial tools and public services. There is no silver bullet and it will be an uphill battle, but if Brazil can overcome its struggles, the country can truly become a leader in the world of web3.
David Liebowitz is a contributing writer to The Defiant.