Crypto in Latin America: PMF, Opportunities, and Challenges

If you've been following Odisea's work for a while, you'll know we're LatAm giga bulls. I bet many of you reading this are as well. And if you're a crypto builder and aren't taking the region seriously, you may want to reconsider. LatAm is ready for mass adoption of crypto protocols and we hope you’re ready for what’s about to come...

Let's start with where the region stands today:

Brazil, Mexico, Colombia, Argentina, Venezuela, among other countries in the region have some of the highest rates of adoption GLOBALLY. This rate of adoption is only increasing at a rapid rate throughout the region too. Let’s look at what’s happening across the region.

El Salvador was the world's first country to adopt #BTC as legal tender. That is huge! The country currently holds hundreds of millions of dollars of Bitcoin on its balance sheet and purchases another Bitcoin every day. They mine Bitcoin with geothermal power—that's right, they're literally mining Bitcoin with volcanoes! Awesome. 

Argentina has long been a hotbed of crypto developers. Some of the ecosystem's most valuable projects come from the land of asados. @brian_armstrong often cites his time in Buenos Aires as the moment where he truly understood the opportunity for crypto globally. 

From Mexico all the way down to Argentina, you're going to find a local community for just about every major crypto ecosystem out there. Latin Americans are some of the most involved groups of governance contributors, developers, and offer a really wide set of educational opportunities for people who are either 10x engineers or are just dipping their feet into the ecosystem. 

OK... pero like why? Well, let's talk about Product-Market-Fit (PMF):

Latin America is slowly emerging from centuries-old colonial rule, where power was extremely centralized in a privileged set of actors. Couple that with BRUTAL Cold War-era conflicts that left many countries reeling and with hollowed-out institutions and you've got yourself a region where the promise of more decentralized, permissionless, and self-sovereign economic and social systems sure does sound nice. 

In their current form, Latin America’s nation-states are also fairly young - with many republics only being established a little over 200 years ago. Latin America’s population is also skewn to a younger demographic, which, as crypto matures, will also increase the number of younger forward-thinking people who will be willing to adopt this technology. 

So, for those of you asking the question... blockspace for what? Here's some ideas where I'm personally bullish:

Latin American banks are super extractive. It's not uncommon to see 100%+ APY's on loans, many times the interest rate people are quoted is a daily interest rate, which people fall for without realizing that it'll end up compounding to hundreds of % in interest. 

Many in the region can't even open up bank accounts, due to permissioned banks intentionally barring the most disenfranchised in doing so, resulting in a disproportionate amount of the population unable to access financial services. In many extreme cases, the government has seized people's assets without justification. 

As many of you know, remittances also make up a HUGE amount of people's incomes in the region, often being one of the important drivers of economic growth in many countries (in many cases double digit’s worth of a country’s GDP). The problem here is that you may be charged exorbitant amounts of money for sending and withdrawing the money you receive.

What can be built: 

• offer people a way to send, spend, borrow, and save while retaining sovereignty over their assets. 

• Build front-ends for people to access "complex" DeFi strategies with a seamless UX. 

• Instant, (nearly) free cross-border payments. 

Many of LatAm's governments are some of the world's most corrupt institutions. Politicians use the façade of political ideologies to siphon exorbitant amounts of money from public treasuries to benefit themselves. Parties buy people's votes with false promises. Voting systems will go down without explanation mid-vote, and a losing party is suddenly 10 points ahead of the other. Voting fraud is much more common than it should be. Our democracies are frankly a joke. If you want to get any paperwork done, it will take months, if not years, for even the most basic procedures. 

What can be built: 

• onchain national budgets where we can see where everyone's public contributions to a government are flowing. 

• Better and more transparent ways of administering national administrative processes (a-la Estonia). 

• Onchain voting systems. 

• Network states that offer entirely new ways of engaging in governance.

Latin America is renowned for its contributions to the artistic world (see: Frida Kahlo, Paolo Coelho, Bad Bunny, Shakira, among others). Aside from world-renowned artists, LatAm is also a net exporter of all sorts of art. Despite having a knack for creative endeavors, across the region, there are oftentimes extractive middlemen that drive away value from the end producers of this artistic work. Ultimately this leaves creators with less value generated from their artistic endeavors.

What can be built: 

• Marketplaces that remove middlemen and ultimately enable creators to receive more equitable rewards for their work. 

• Ways of authenticating the origination of artwork. 

• Better tools for creators to connect with their communities, track fan base loyalty, and reward their fans. 

Unfortunately, LatAm has some of the lowest literacy and educational rates in the world. Public schools are oftentimes an afterthought, and even if there is decent educational infrastructure, parents have to make difficult decisions regarding whether to leave their children in school or not. Families may not be able to afford leaving their kids in school, as they would much rather have their children working as soon as possible to generate income for their families. 

What can be built: 

• Learn-to-earn is an obvious route here. A program enabling families to earn (crypto) rewards that are distributed according to certain educational criteria being met could seriously impact the region. 

All of this leads us to the next and final segment of this odyssey, which aims to answer the following question… IF Latin America is ripe for crypto adoption, why haven’t we seen mass adoption happen across several of these verticals? 

Even if you’re the most passionate follower of crypto, religious listener of podcasts, and are a CT addict - it’s hard to stay on top of the latest trends, developments, and opportunities in the space. Navigating the crypto rabbit hole is hard for even the most dedicated, let alone for someone who is a recent entrant into the ecosystem.

What can be built:

Abstraction. If they hope to participate in the onchain economy, end users should not be forced to understand the technical underpinnings of the proposed solutions. There is lots of technical talent in the region, and we should continue supporting legitimate educational efforts that aim to nurture developers and artists jointly with the broader public. Yet, requiring technical expertise to interact with day-to-day crypto use cases,  shouldn’t be a prerequisite to reap the benefits of crypto.  In the exact same way, no one needs to understand the intricacies of our financial system every time they wish to pay for a coffee.

Many Latin American countries have yet to set firm crypto stances. However, we have a track record of following our Big Brother’s footsteps in the north, which, as things currently stand, may not be optimal for the adoption of crypto in our communities.

What can we do:

Optimistically, the lack of a clear regulatory landscape means there is A LOT of opportunity to actually properly educate regulators on the benefits of crypto and push forth pro-crypto regulation. Further, we should focus on supporting more pro-crypto regulators passionate about advancing the state of technological innovation in the region. As adoption in our community increases, crypto is serving as a schelling point for politics across and within countries.

In a recent study we conducted with Odisea, we found that over 90% of founders in the region struggle with raising capital. Without being able to raise capital, many of the region’s most promising founders cannot scale their projects to a meaningful scale, leaving significant impact on the table. 

What can we do:

Raising capital is a very multifactorial process. This is a double-sided problem: many investors we’ve spoken with often say they don’t find the caliber of talent in Latin America that meets their investing standards. Many founders do not have prior experience raising capital within technology or crypto-focused funds. 

As founders - we should focus on nurturing founder-building skill sets amongst our community members looking to take the next step. By supporting each other in conducting better market research, rapid iteration within our product development, establishing regulatory frameworks, and aligning VC & Founders’ investment strategies. By doing so, we’ll be able to unlock more opportunities for investors to back leading teams leveraging crypto to transform the fabric of our society.

There’s an interesting opportunity to shift our mindset from one that is focused on a Latin American isolationist mindset, to one that aims to shift the region’s focus to look towards more global horizons. Yes, it’s important to begin developing markets within LatAm, but founders should also have the ambitions to scale their operations globally. 

Every industry has to deal with parties seeking to unjustly cheat their way into extracting value from the system. With so much focus on LatAm, we’ve seen our fair share of grifters crop up throughout the region. The unfortunate outcome is that as these illegitimate acts are unveiled, some backers of the region may look upon the region unfavorably and real builders with legitimate intentions may not receive the backing they deserve. 

So: We have to do a better job of calling these malicious actors out. Together I believe we’ll be able to weed these parties out, ultimately leading us to legitimize and flourish as a region. All it takes is a few bad apples to give those who are interested in supporting the region a sour taste of what is unfolding here. The more we can keep each other accountable, the likelier we’ll be able to build a legitimate industry together. 

If you’ve made it this far, congratulations! I appreciate you taking the time to read this gargantuan thread. If like many of us, you’re passionate about building out new coordination substrates for Latin America, join the cause! There are many ways for you to contribute and continue to build.

Whether you're a LatAm-based/operating founder looking to scale your venture or a global protocol/foundation interested in entering the region, reach out! We're always keen to work with top teams who are deeply passionate about leveraging crypto to drive meaningful change across the very fabric of society. You can also join our Telegram community and connect with other passionate folks in crypto across LatAm. Lastly, you can always subscribe to our blog to stay updated with the latest happenings across the Odisea ecosystem.

¡Vamos!

Special thanks to Nico, Francis, Romina, Max, Bunny, Kyle, and Kairon for reviewing this post :)