Bancor serves as the technology layer in the Sarafu Network. LocalCoin, core developer of the Bancor Protocol, built a platform that allows Grassroots to create tokens and distribute them to users, while also giving users the ability to seamlessly trade and manage their tokens using Bancor’s smartphone crypto wallet or SMS on feature phones.

The Bancor Protocol ensures convertibility and liquidity for the tokens without needing a counter-party or an intermediary. That means commerce can be autonomously and securely processed on the blockchain without having to rely on a central authority like a bank or telecom to maintain the integrity of the network. Pricing and transactions occur through a secure set of auditable smart contracts integrated with the Bancor Protocol on the POA Network Ethereum side-chain, enabling instant transactions and minimizing costs to a fraction of a cent per transaction.

A breakdown of spending in the Sarafu Network (February 2019). Food makes up 40% of the transactions.

Boots on the Ground

Researchers from Grassroots, LocalCoin and universities worldwide are now able to analyze, in real-time, the flow of liquid community currencies inside and across the villages, creating diverse and resilient channels of monetary links between locals. At this very early stage, the pilot is producing a wealth of insights on demurrage (negative interest or expiring money), stable currencies, money velocity and much more, all of which are being used to improve the Sarafu Network and Bancor Protocol, so aid organizations and local groups across the globe can more easily deploy community-currency systems.

Grassroots’ Co-Founder Will Ruddick simulates Bancor-powered community currency systems.

Above all, we’ve learned that community currency innovation is driven not only by technology, but by having boots on the ground to train and onboard users, stress-test the platform, spread awareness and chart a path forward with local regulators. This is one crucial reason why Bancor couldn’t be more thrilled to have found an experienced and dedicated local partner in Grassroots Economics.

A Grassroots Economics agent shows a local retailer in how to send/receive blockchain-based tokens via SMS.

The steady organic growth of the Sarafu Network reminds us that many of the goods and services in these villages are naturally occurring — they just need new forms of money to become practically transferable. For example, when day-laborers bring fiat currency (Kenyan shillings) back to the villages, they spend it on local goods and services like tomatoes, haircuts and school fees. But the labor is seasonal, and when it dries up, so too does the cash in the community. The tomatoes and teachers still exist, but the community lacks a way to trade them. People go hungry and children don’t go to school because they lack pieces of paper — despite the farms, teachers and entrepreneurs around them, who still have goods to sell and services to provide.

Ultimately, the vision for the Sarafu Network and Bancor is to create a common infrastructure for local commerce — a decentralized, public good which requires no fees, no central authority, and can be seamlessly and affordably operated and accessed by any community in the world — to turn scarcity into prosperity.

Based on the success thus far with our Kenyan partners across nine villages, Bancor is seeking to open and extend its community currency and token creation platform further, to allow for humanitarian aid, cash transfer and entrepreneurship to flourish in more places. We are eager to collaborate with those who want to deploy these new technologies in service of over three billion people living below $2 a day. Join us.

Are you an impact investor or aid organizaton? Interested in launching a community currency of your own, or researching the implications of blockchain-based currencies on local economies? Contact us at community@bancor.network.