Good news coming from El Salvador as their government has signed an agreement with Latin American asset tokenization company Koibanx to develop its blockchain infrastructure on Algorand.
Algorand, as a blockchain platform, aims to accelerate the merging between traditional and decentralized finance by developing a permissionless and open-source blockchain network on which anyone can build upon.
The news about working with the government of El Salvador on blockchain infrastructure on Algorand came from their official Twitter account on the 31st of August, 2021.
Over the years, the government of El Salvador has been showing a high interest in the cryptocurrency space, with plans already underway to make bitcoin a legal tender in the country. This decision would make the Central American country the first in the world to make bitcoin its legal tender, although most of their citizens are against that decision. However, the aim is to make crypto a means of exchange in the country alongside the dollar.
According to the press release by Koibanx on their Medium page, they chose Algorand due to their wealth of experience in building several national public and private universities in Latin America, one of which is the blockchain-based COVID certification program.
What is Algorand?
The decentralized network called Algorand was developed in 2009 by Silvio Micali, an MIT professor, to help combat the blockchain trilemma of achieving speed, security, and decentralization simultaneously.
It is a payment-focused network that helps people in the crypto sphere achieve rapid transactions with near-instant finality. This gives them the leverage to perform up to a thousand transactions per second with a transaction finality of fewer than 5 seconds.
The Plan to give El Salvador a Technology Boost
From all indications, the Latin American country is bent on using blockchain technology like Algorand blockchain infrastructure to boost the country’s technology. Apart from working with Koibanx to build an Algorand blockchain infrastructure, the country has decided to adopt bitcoin as a legal tender on the 7th of September, 2021.
The President, Nayib Bukele, has stated that he hopes cryptocurrency can help save money on remittance fees to help produce more economic revenue for the country.
El Salvador’s economy depends heavily on remittances or money sent from other countries, but this has been seriously slowed over the years, owing to its high costs and wait times. President Bukele hopes this will change with the arrival of Algorand blockchain technology in the country.
There are also other financial benefits involved in making bitcoin the legal tender in the country, like reducing its heavy reliance on the dollar and other first-world currencies. Also, the adoption could lead to an increase in foreign investments in the country.
For one, Algorand is a highly scalable cryptocurrency, meaning it can handle hundreds of thousands of high-volume transactions. It is, therefore, a great option for a ton of use cases.
Like Leo Elduayen, the CEO and founder of Koibanx, explains, the technology needed for carrying out the task in El Salvador had to be robust enough to handle the needs of the entire Central American nation.
Algorand was explicitly created to address the trilemma of cryptocurrency issues (speed, security, and decentralization.) According to Elduayen, he believes “. . . Koibanx found a proven blockchain that meets our rigorous requirements for speed, security and stability.”
There are many financial institutions, DeFi projects, and now the entire country of El Salvador relying on Algorand, not to mention over 700 organizations building on it. One of such organizations is the Italian SIAE (Italian Society of Authors and Publishers), a copyright agency in Italy.
What does the Project Entail?
The Algorand blockchain infrastructure project in El Salvador will be developed for financial purposes and allow the hosting of their official records on the blockchain platform. As a matter of fact, Koibanx has made it clear that money would not be transferred or exchanged on the platform, but the main focus would be securities or rights, such as property titles or bank guarantees.
According to the CEO of Koibanx, Leo Elduayen, El Salvador’s National Registration Center (CNR) has been involved in working on the project with Koibanx. This will allow every individual or legal entity in the country to have their address containing tokens or hashes with documentation.
In addition, every transaction concerning private companies and legal entities with different government identities will be recorded on the Algorand platform. There are also indications that El Salvador’s government blockchain plans are not going to end with Algorand.
What’s more, the government of El Salvador is also working on creating a local cryptocurrency token that citizens can use to buy and sell services in the country. Leo Elduayen has noted that while the Algorand platform can sustain a national cryptocurrency for the country, there are currently no plans to use the platform for that purpose.
The CEO of Koibanx, Leo Elduayen, said, “El Salvador is paving the way for other countries to make the promise of blockchain a reality. We are honored to be working with the government to enable Salvadoreans to access a global digital economy and the potential for a more prosperous future,” and he is right.
The move to build blockchain technology by the government of El Salvador is a good one to open the minds of citizens of El Salvador to the evolving technology and make them active participants.
There are a few concerns about adopting bitcoin as a legal tender in the country, as even the World Bank has warned against it. Other critics have seen the move as “attention-grabbing” by the government of El Salvador. However, the idea of the government accepting more decentralized versions of currency could have significant ramifications for the country’s economy if done properly.
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