If you do a quick search on the internet about new cryptocurrencies, you will notice that the market is full of great projects, whose cryptos are presented as an alternative for investing, since the objective of many is usually to increase in value over time; although you can also run into stablecoins, whose focus is on maintaining a stable price, which It is useful for investors to protect their money from abrupt market movesor, allowing them to be used as a tool for savings.
Both investors and savers can find themselves with a common problem in the early stages of crypto projects; lack of liquidity. This makes it difficult to exchange cryptos for each individual's national currency, this situation is especially experienced in Latin America, but there is a platform that seeks to change this: El Dorado.
This article has been written based on the Tech Talk Bootstrapping Liquidity in Emerging Economies, in which the CEO of El Dorado, Guillermo Goncalvez, participated. If you want to see the full talk you can do click here.
What is liquidity?
In economics, liquidity is called the ability of an asset to be exchanged for money without the need to reduce the price of the asset, in other words, the more liquid an asset is, the faster it can be sold, incurring minimal risk. This is why In the crypto markets, we always seek to have a high degree of liquidity. To achieve this, there must be supply and demand, which means that there must be enough of the asset available for sale and a proportional number of people willing to buy it.
If in a crypto asset market there are many people wanting to buy, but few willing to sell, consider that there is a lack of liquidity, we also speak of a market with little liquidity if there are many sales orders but few people willing to buy the asset.
The Latin American Problem
If we review economic theory, traditionally the most liquid asset is fiat money, since it can be exchanged for other assets without losing value. However, in Latin America, there is a peculiarity that can be seen in most countries; national currencies lose value very soon, so that liquidity is usually diminished easily, this means that people have difficulty saving in the long term and accessing assets.
Among all the countries of the continent, one stands out in particular: Venezuela. This is the only country facing a hyperinflationary process, as a result of erroneous economic policies, so that its inhabitants normally noticed that the bolivar, their national currency, was abruptly losing its value in a matter of days and even hours.
Faced with this, Venezuelans began to acquire dollars and cryptocurrencies to protect their money; first they were merchants and business owners, then the rest of the citizens, until the economy was almost completely dollarized through an informal process. So it became common for citizens to want to exchange bolivars for dollars or cryptocurrencies and vice versa.
However, carrying out this transaction through the traditional banking system is usually fraught with complications (and it was even a banned activity for many years), so the majority of Venezuelans should run the risk of making exchanges in the informal market.
That is why the founders of El Dorado, who are Venezuelans who have experienced all this process firsthand, observed the need to create a P2P platform where dollars, euros and cryptocurrencies could be easily accessed, but not only in Venezuela, as they decided to extend its use to other countries such as Argentina, Colombia and Peru, where access to savings and investment through their national currencies is also limited.
Other very common Latin American problems are the lack of banking for a large sector of the population, and the absence of interoperability between Latin American banks; for example, if you are from Peru and you want to make a transaction to a bank in Argentina, it's almost impossible to transfer directly from one bank to another, so circumstances will force you to exchange your money and use an intermediary or external bank, which means losing a significant percentage in fees.
A solution to these problems is also offered through El Dorado, but we will explain this in detail later.
Celo: The Ecosystem That Made El Dorado Possible
To achieve the goal of reaching El Dorado, it was necessary to allow access to stablecoins that were close in value to more liquid currencies, such as the dollar and the euro, although there are a couple of stablecoins in circulation for some time in the market, there is a younger pair that stands out from the rest; the Celo dollars and Celo euros (cUSD and CEur).
Despite being relatively new, they have been chosen to be the protagonists of El Dorado because they are two of the stable cryptocurrencies belonging to the ecosystem Celo, which seeks to create financial tools that guarantee opportunities for prosperity for all. In addition, they stand out from the rest in the technical aspect, since by simplifying the addresses of the wallets and allow the use of their cryptocurrencies to pay for ERC20 tokens Fintech applications can be created in which users can easily exchange cryptos and tokens without having to pay high fees for the Gas fee.
And that is where a solution is offered to problems related to banking interoperability and the lack of existing banking, because through this technology adopted in El Dorado, cryptocurrencies can be exchanged for Latin American currencies, while you only need to have a smartphone to carry out domestic and international operations.
All of the above increases the liquidity of both stablecoins in Latin America, which means that, regardless of the country where you are, you can easily access a solid savings mechanism, which can then be converted into fiat currencies without incurring a high risk.
Consequently, they become a better alternative to other more volatile cryptocurrencies, since they offer the possibility of setting aside exact amounts as part of a savings plan, providing dynamism to the market, acquiring products and services through e-commerce, and many more possibilities that will emerge as their adoption increases. These alternatives mean new opportunities for finance and trade to be strengthened on the continent in a way never seen before.
Would you like to protect your income through cryptocurrencies that offer you stability? Download El Dorado and discover for yourself the various benefits. Don't be left out of new financial technologies!
