Major banking and public sector services are exploring and adopting innovative technologies that optimize payment processes. In this era of growth and discovery, the case has never been stronger for integrating the world of legacy finance with verified blockchain accounts in a legitimate, public, permissioned, and compliant manner. While the ground has been laid by decentralized finance (DeFi) platforms, systems built on a compliance driven programmable finance (ProFi) infrastructure stand to accelerate the digital transformation of financial and public sector services.
One major development finance player, the Inter-American Development Bank (IDB) Group is setting the stage for a compliant public permissioned blockchain-powered infrastructure in Latin America and the Caribbean. Instrumental in the establishment of this framework is LACChain, a Global Alliance led by IDB Lab, the innovation laboratory of the IDB Group. LACChain has already been used as a proof of concept to execute cross-border payments between IDB and Citi Innovation Labs of Citibank.
LACChain’s membership spans across 15 countries in the Latin American and Caribbean region, with over 49 partners collaborating towards a platform agnostic framework for a permissioned, public, blockchain-based infrastructure. In 2021, Block.one became a strategic partner to provide technical expertise on EOSIO for the LACChain initiative, alongside members including EOS Public Network participants EOS Costa Rica and EOS Argentina.
LACChain represents a dynamic shift towards embracing compliant and regulated, ProFi-based systems in Latin America. Currently, there are two blockchain networks in development that fit LACChain’s framework, the LACChain EOSIO Network, and a LACChain Besu Network, powered by Hyperledger Besu.
Part of what sets LACChain apart from other blockchain implementations is the fact that it is backed by a highly accredited financial institution, the IDB, the leading source of development finance for improving lives in Latin America and the Caribbean.
EOS Costa Rica Co-founder Edgar Fernandez works with LatamLink, a voluntary alliance of companies familiar with EOSIO that are contributing to the LACChain EOSIO Network. He says the development bank takes a meritocratic approach that sets aside political overhang and corporate favoritism. “Since it is tech agnostic it’s perfect for EOSIO, because if you let tech speak, EOSIO already has a lot of things that are native that they had to build or adapt in different protocols.”
To bake compliance into LACChain’s framework, IDB Lab came up with the idea of a permissioning committee and a set of permissioning rules that allow to define clear liabilities in the use of this decentralized network. Each entity operating a node is responsible for that node and its actions in the network, such as broadcasting transactions (for writers) or producing new blocks (for validators).
Edgar explains, “If you’re not going to charge for something, then you need to know who’s using it and for what purposes, and that’s where the legal framework comes.”
LACChain took advantage of EOSIO’s configurability to fit its legal framework. Specifically, LACChain modified the consensus mechanism on EOSIO from the default state of Delegated Proof of Stake to a Proof of Authority based model, enabling any entity to become a validator which maintains decentralization but erasing competition which eliminates energetic costs. Although some changes were made, LACChain’s EOSIO deployment still benefits from core updates from Block.one, something the team took into account during development.
With these modifications, EOSIO offers native platform attributes such as human readable names, free transactions, and support for multi-signature smart contracts that facilitate the creation of a Permission Committee. In contrast, the same set of features required months of development on Hyperledger.
Edgar sees an enormous opportunity in the Latin American region, where the market is primed for a practical modern solution “It has the potential to create millions of verified human EOSIO based accounts if there’s a use case behind it, whether that’s regulatory, in the private industry, or public sector. It could be anything from decentralized ID to efficiency in customs agencies, to issuing bonds on a blockchain, to tokenized fiat money, or the traceability of vaccines.”
Existing financial service providers will be able to tap into LACChain’s EOSIO-blockchain based settlement system, leveraging smart contracts to tokenize fiat money in an environment designed to facilitate compliance. “It is a representation of what all these countries have in terms of currency,” explains Edgar. “You don’t have to build a new blockchain for the currency of each country. It allows you to have regional integration and to be more efficient.”
In cases where settlement is critical, such as disaster relief loans, the ability to settle in minutes can be a life changing factor. Retail banks can use tokenized fiat to send stablecoin representations of local currencies that are verified by two compliant entities immediately over LACChain. In turn the same banks turn around and issue the fiat locally through any branches owned in that region.
“That really opens up the possibility to other things we are already seeing in terms of insurance contracts on a blockchain, exchanges on a blockchain, property rights on a blockchain which they are already piloting and opening up the floodgates of financial services on a compliant infrastructure.”
LACChain’s deployment of EOSIO is designed to enable compliance at the system contracts level, so the programmable assets managed on it can adhere to regulatory requirements.
With EOSIO smart contracts managing programmable money in a way that is native compliant and regulatory, this helps to prevent fraud. This is done by sharing the security across everyone running the public infrastructure. Resources on LACChain are only allocated to an account once it is verified through a Know Your Customer (KYC) checkpoint that meets the requirements of the network. In turn, each writer node in the network is designated as legally responsible for all the transactions it sends.
If a node allows a transaction that goes against the terms and conditions of the LACChain network, the node operator will be banned from the network. With KYC checks in place, the network is designed to prevent the offender from having the opportunity to make repeat offenses.
In return for sharing the legal responsibility of network securing, LACChain participants get access to free use of the infrastructure.
The LACChain EOSIO Testnet is now ready to serve as the proving ground for use cases in the Latin American and Caribbean region, and to demonstrate a path for future compliant global deployments of ProFi infrastructure. To start deploying on the new testnet, contact LACChain by visiting www.lacchain.net or [email protected].
Our #BuiltOnEOSIO series showcases some of the amazing projects leveraging EOSIO technology to build a more secure and connected world. If you would like to suggest a project for us to feature please send an email to [email protected] for our Developer Relations team to review.
For more information on how EOS VC supports the EOSIO ecosystem through strategic investments and venture capital partnership funds, visit vc.eos.io.
– Block.one Developer Relations team
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