The Vietnamese startups using blockchain to fix broken economies
Vietnam has one of the fastest-growing economies in the world. Its startup scene is thriving. It regularly wins awards for entrepreneurship and innovation. Its people are some of the smartest, most influential thinkers in the world.
And yet, Vietnam’s inflation is among the highest in the region—double that of the USA, according to tradingeconomics.com. Worse still, 69% of people don’t have access to a bank account or financial services. Those that do, are forced to pay heavy fees for withdrawals or sending money overseas.
But there’s hope. A surge of blockchain startups is working on solving these economic challenges both at home and abroad. But what exactly is blockchain technology? And how are these businesses using it to enact change?
What is blockchain?
Blockchain is similar to a shared database. Rather that one person or organization controlling the database, everyone shares a copy and helps maintain it. You can think of it as a collaborative online ledger—like Google Sheets—except all changes are irreversible and stay on the blockchain forever.
You can’t just make any old change, though. Blockchains use a consensus model to verify and validate new transactions, which prevents fraud. The two main ones are Proof-of-Work (PoW) and Proof-of-Stake (PoS):
- In PoW, network computers, called miners, compete to solve a cryptographic problem. The first to solve it with 51% network approval wins a cryptocurrency reward and the honor of adding a new “block” of transactions to the chain. This model was first popularized in the Bitcoin whitepaper in 2009.
- In PoS, new transactions are added by validators—people who’ve invested (staked) cryptocurrency in the blockchain and therefore have an interest in maintaining its integrity. VeChain (VET) uses this consensus mechanism, and it’s generally considered faster and more efficient than Proof-of-Work.
Vietnam is fast becoming a blockchain hub. It held its first national blockchain summit in 2018, and projects like Infinity Blockchain Labs are helping agriculture and supply chain businesses exploit this new technology to save costs and track goods.
But blockchain’s potential is perhaps most keenly felt in finance. Everything from money (USD, for example) to physical assets (like gold and property) can be digitized and securely stored, transferred, and exchanged on blockchain for almost zero cost.
And when value can be manipulated as easily as email, the possibility of an accessible financial system for everyone, no matter where you live or how much you have, is suddenly within grasp.
Constant: secured P2P lending for all
In a bustling office, deep in the dusty heat of Saigon’s Phu Nhuan District, a team of engineers is helping people do more with their money. Founded in early 2019, Constant (www.myconstant.com), a secured P2P lending startup, has been using blockchain technology to offer secured loans and investment opportunities to anyone with an internet-enabled device.
Constant matches borrowers and investors on their chosen interest rates and terms. All lending is secured by cryptocurrency collateral, meaning investors get a return whether borrowers repay or not. With publicized returns of 10% or more, it’s an enticing, accessible alternative to stocks, and just wouldn’t have been possible without cryptocurrencies.
“Cryptocurrencies make great collateral,” said Nguyen Bui, Head of Growth at Constant. “If a borrower defaults, or if their collateral devalues too much, we can easily sell the collateral to repay investors. This protects investors and means borrowers can get loans regardless of their credit history and without having to cash out their cryptocurrency investments.”
Incognito: protecting your privacy
In another Saigon workspace, a team of cryptographers is building a private transaction network for digital currencies. Incognito (incognito.org) styles itself as “Incognito mode for your crypto,” a way to keep your transaction history private. But it’s also a platform for building “privacy-first” applications (pApps) and you can even issue your own private cryptocurrency.
Blockchain is praised for leaving an indelible transaction record, but this isn’t always a good thing. For one, a public history can be a honeypot for hackers. It’s also possible to deduce someone’s identity from what they spend and where. Incognito therefore solves a problem that’s only going to get worse the more popular these assets become.
“Privacy shouldn’t be playing catch up when cryptos go mainstream,” said Ning Tan, Incognito’s growth lead. “The market is maturing fast, with more data and things being tokenized and represented on-chain, but there are few practical ways to protect your digital footprint. There needs to be a fast, easy, yet private way to transact on the blockchain and that’s where Incognito comes in.”
National institutions are also taking note. Recently, TPBank joined RippleNet, a blockchain network, to offer low-cost, fast remittances between Japan and Vietnam, and Vietnamese lawmakers authorized the country’s first cryptocurrency exchange earlier this year.
Will blockchain fix Vietnam’s socioeconomic problems? Time will tell. But with a talented workforce, a fertile startup scene, and the right regulatory framework, Vietnam could very well be a global leader in blockchain-driven change.