Investment Opportunity For The Poor
In the Country I live, any investment had no traditional roots over decades of its national history. The 70-year Soviet period implied a specific mental blockage making any commitment to personal enrichment merely absent in mass consciousness. Generations succeeded one another, but the very term “investment” had no place in our vocabulary.
The reason for it rooted in the socialized ownership of the property — everything in the USSR belonged to the people. Conditionally everything, of course, — a private sector was available to some extent. In addition, many social phenomena for which we pay money today were free — education, healthcare (including medication), and even recreation when state enterprises (the only form of enterprises in the Soviet Union) paid for tourism centres and sanatoriums where soviet workers spent their vacation. Besides, any unemployment did not exist in the USSR in principle — everyone was guaranteed with the job in a non-commercial socialist economy.
Thus, very few things for which a soviet citizen might save money were remaining: cars, imported foreign goods (that were very expensive and almost unachievable for the majority), and the so-called “dacha” — small pieces of land at the city suburbs where people could build small grotesque huts not for living but for holding their garden tools with which they processed their tiny vegetable patches. Such a “proxy farming” was a popular activity among soviet pensioners whose state pensions were ludicrously small (40–100 USD/month, take it or leave it). The majority of Soviet people had bank books for their savings accounts in the only available bank — the national bank. Living in a super-economical mode they put small amounts of money to their accounts over decades not for buying something expensive someday but because no objective for investment was available.
Powerful state guarantees covered the entire life of the Soviet people, the Soviet ruble was super stable, and people had no idea for what their savings could be spent.
But everything socially positive (if it can be called so) ended after 1991 when the Soviet system collapsed. Due to hyperinflation, all people’s savings on their bank books evaporated almost instantly. My old grandpa whose 40-year saving practice gave him about 35 thousand rubles managed to make a last-minute purchase of an average fridge while a year before that sum was enough to buy 5 (!) the most expensive soviet cars “Volga”.
Capitalism occupied former soviet republics seemingly bringing various business opportunities to their citizens. However, the vast majority of the former Soviet people were very poor having no savings and almost no property to start some business in a new reality. But the worst thing was that nobody knew how to do business in a non-socialist environment. A thin stratum of rich people appeared from the transformation of soviet bureaucrats and the communist party elites into post-soviet oligarchs who caught a chance to redistribute wealth in their favour. But they don’t count — that redistribution had nothing common with capitalism being rather a unique sort of large-scale State thievery.
Almost 30 years have passed since the downfall of the USSR. A couple of generations have changed already. Are contemporary Ukraine and Russia critically different from the former Ukrainian SSR and Russian SFSR?
In terms of people’s wealth, they aren’t, unfortunately. At least 90% of Ukrainians live in the same poverty they lived during the Soviet period. But today they have no affordable education, free healthcare, and guaranteed employment. In fact, they became much poorer than in the past. A sum of 1000 USD is huge money for the majority of them while the “investment” word does not appeal to any of their life experiences.
Leaving behind the soviet past, what can all those poor people account on in their capitalist present? What investment opportunities are affordable for those whose savings count in hundreds of dollars? None from the sectors where institutional investors do their business is accessible for the poorest strata whatever Country is considered. Both governments and national elites do not care about it once the social function of the poor implies no independent behaviour.
Financial self-sufficiency and independence of a huge mass of common people are always dangerous for any elite. Upper strata head the social pyramid not because they are rich, but because they control the very opportunity to become financially independent. Common logic suggests that the contemporary banking system along with the Nation States do its best to deprive billions of poor people throughout the world from the very access to any investment.
The so-called upward mobility works in Hollywood movies mostly and only for some middle-class persons whose hard work, expensive education and good luck allow them to climb the social ladder. A modest office manager can become a boss if … further, many popular Hollywood cliches follow (you name them) to define some must-have personal capabilities that potentially lead a thriving person to a socio-financial success.
A young college graduate from Ukraine whose only chance to earn for a decent living is to do dirty manual work as a guest worker somewhere in Poland can never save enough money to critically change the present social stratum for some upper class. At best, such an active person can buy a used car in Germany for 2–3 thousand EURO to become an Uber driver in Ukraine. After that, a chance to pay rent for an average two-bedroom apartment in Ukraine appears.
What else can such a person afford later in life that can be considered as signs of improvement of his/her social position? A small bank credit for modern home appliances and more or less sufficient earnings for the day-to-day necessities such as furniture from IKEA purchased by instalments, used iPhone smuggled from the USA, quite good nutrition thanks to cheap Ukrainian food from local farmers, barbecue with friends on weekends, and a one-week summer vacation at a cheap resort in Turkey once a year. Not bad from the perspective of the rest majority. But the described typical situation implies a social ceiling against which that person inevitably crashes with his/her head in seeking some other opportunities to become richer.
Even if such a “lucky” almost-middle-class guy could save several thousand dollars by compromising small pleasures of life over the years, almost nothing can be offered him by a conventional capitalist economy as an effective investment case.
Of course, some physical gold or foreign currency purchased at low and sold at high can help to earn a little if moments were chosen correctly. But from whom our Uber driver can get proper advice when and what to buy and sell? Such persons are always busy with a day-to-day fight for survival to have enough time and mental power to search for specific info on the internet for a financial self-education. After a typical 10-hour working day, only TV shows and, probably, a Facebook wall remain as a window on the world beyond their mundane reality.
Later in the text, a special approach to address the problem of investment opportunities for the poor is described. It is based on blockchain technology. Those who don’t accept crypto-economy due to either numerous scams available in it (let’s admit facts as they are) or because of some different reasons can stop reading here. Don’t get me wrong, I am not an investment guru to invent a revolutionary method of investment in a paradigm of the conventional economy. I am not going to reinvent the wheel as well. What I propose can work only in crypto due to its decentralized nature. If you didn’t lose interest after such a preface, keep reading.
The ease with which poor people can reach virtual crypto assets makes the investment in crypto achievable for those people whose savings along with social status are far from the ones typically required from the traditional investors. Numerous legal and semi-legal cash-to-crypto exchange services provide even the poorest strata with an opportunity to buy tiny portions of famous cryptocurrencies (8-decimal division makes sense). Thousands of tokens and coins are available today in crypto economy — choose what you like the most. The unprecedented accessibility to virtual assets distinguishes crypto from the traditional fiat-driven economy.
But what’s next? What do people usually do with cryptocurrencies? As we know, three main options are available: holding, trading, and staking. Holding is just a pending version of trading — sooner or later the assets from a cold crypto wallet should be either sold or changed. Otherwise, crypto holding can bring only moral satisfaction by realizing that you are getting richer. Virtually richer. This option is hardly compatible with what the poor people look for.
Besides, the time necessary for getting significant positive results in crypto holding is quite long. Even super lucrative crypto assets that can bring multi-x profits have to be left unmovable for months and years. Holding is profitable when you select the right asset at the right moment. Needless to say that a lot of nerves won’t hurt to panic when your asset’s price starts jumping up and down due to volatility inherent in a crypto market. Thus, crypto holding is not for everyone in general not to mention the people who seek some extra income from a tactic perspective.
Trading on crypto exchanges is even a more specific activity than crypto holding. Similarly to trading on the other non-crypto exchanges, only a small group of professional speculators can gain while all the rest usually lose. This is too risky to practice without a deep understanding of how the market moves. It is like playing roulette — the proportion of wins and losses is 50/50 at best. Of course, a trial-and-error approach can lead to better trading results someday, but the very feasibility of crypto trading for a mass of the poor remains highly questionable.
The third option seems the most reliable type of crypto investment regardless of which particular social strata an investor belongs to. Staking crypto under special staking platforms can bring 6–18% of annual profit. Staking is similar to holding, but in contrast to the latter, it brings some income without the need to sell your assets. The only risk is to trust your savings to scammers. Hence, staking fits the people whose expertise in crypto is equal to almost zero. Namely, this simplicity makes crypto staking the most appropriate for small amateurish investors in terms of the very procedure.
However, the majority of staking platforms show quite significant sums in crypto as the lowest limit acceptable for staking. They start counting from thousands of dollars. Such limits make this type of crypto investment barely affordable for many small investors. Besides, at least for 6 months, your assets should be held at a platform to be rewarded with some dividends. Running a master-node when you are rewarded for supporting a blockchain working on a Proof-of-Stake protocol can be considered as a subdivision of staking. A certain proficiency in a network administration is required from a user of a master-node in addition to quite a large amount of related crypto. Both conditions make running a master-node even less acceptable for small investors than staking.
All three main options of crypto investment are accessible for the poor investors in general being, nevertheless, hardly appropriate due to their specific aspects mentioned above.
How to connect the affordability of crypto investment with the stability of many traditional non-crypto assets such as precious metals, physical property, real estate, natural resources, etc? An original hybrid approach related to large-scale crypto deals is described in one of my previous posts. Even though the approach appeals to the rich, not to the poor, the very method of hybridization of various assets can be applied to how the problem of investment for the poor can be addressed.
The basis of the method is grounded on what can be called an “opposite crowdfunding” when the initiative comes from the “crowd” instead of an owner of what should be “funded”. In other words, a group of people shares their crypto to purchase some valuable assets with no regard whether the asset belongs to crypto or a real-world economy. The more expensive an asset is, the larger the group of investors has to come together.
Use case #1. Imagine a farmer who needs to increase production by using a new more powerful harvester which is too expensive to be purchased with the currently available operating capital. The farmer can accept a buyback leasing of the harvester. Let’s take 10% of the total harvester’s cost as a proposed annual leasing interest. Let the harvester cost 1M USD. Hence, a 5-year leasing contract implies 1.5x harvester’s price — 1.5M USD to be paid finally by the lessee. Imagine a solution that allows 1000 singular crypto investors to arrange a potluck purchase of the harvester from its manufacturer.
Each investor gets an equal share of 1000 USD in a crypto equivalent. Hence, after the contract expires in 5 years, every shareholder can get back 1500 USD. Not too much in terms of crypto investment — 10% p.a. but in contrast to crypto, the real-world expensive machinery can hardly lose its value due to volatility. Even more attractive solutions can be created when the shareholders remain the owners of the harvester offering it to farmers for rent. After 10 years of operation, the property can be sold at its residual value.
Thus, a small but stable business solution can be established when dividends are distributed among shareholders through automated smart contracts that exclude any accounting fraud.
Use case #2. An average commercial price for a two-bed apartment in Ukraine is 50 000 USD. A long-term leasehold costs about 500 USD/month. An average local Ukrainian can never save 50 000 USD to invest in such real estate. But a group of 100 small investors can do it through sharing the apartment cost by equal 500-dollar shares. Such a group property ownership can make small savings work for their owners. The apartment’s leasehold can bring only 60 USD p.a. profit to each shareholder, but the real-estate value can grow as it typically happens in many Countries. This is a reliable long-term investment that can bring up to 2x profit to each small investor in 5–10 years when the apartment is sold. The group ownership can be arranged through a blockchain-based solution that distributes both property rights and dividends between all investors.
Use case #3. Mining cryptocurrencies under PoW protocol remains a profitable business even though blockchains’ hash rates steadily grow. However, there is a certain low limit of the computing power of mining equipment from which this activity starts making commercial sense. Any poor person owning an average laptop has no chance to earn some sizable amount from crypto mining. On the other hand, a powerful ASIC-based crypto-mining farm costs dozens of thousands of USD. Besides, power supply rates vary from Country to Country significantly.
What if a group of small investors can buy a potluck mining farm somewhere in China? Container-type modular mining facilities are available on the market. The task comes to installation and further maintenance of such plug-&-play mining farms at a place where both electricity rates and tax regulations are appropriate for a crypto mining activity. Group ownership for the mining farm can provide 200–300 poor shareholders with quite stable income in the cryptocurrency mined by the farm. This is namely a hybridized solution when a physical property purchased with crypto by a group of owners to bring them crypto income directly without involving any fiat intermediary.
All three use cases above demonstrate that nothing revolutionary new was proposed concerning group property ownership. The only peculiar aspect of the issue is a decentralized nature of crypto solutions where formalities are kept to the minimum. Namely, blockchain can gather hundreds and thousands of small crypto investors in large groups to establish shared ownership. Automatically executed smart contracts can facilitate both dividend payments and the distribution of shares.
The task, therefore, comes to the development of a relevant software product based on blockchain technology. It can be either a decentralized application running on some blockchain appropriate for the above-mentioned functionality or even a classic centralized (or semi-centralized) exchange-like web-based application. In fact, the very technical nuances don’t play a significant role in it.
Moreover, a vast variety of similar solutions can be created upon this concept to constitute a specific sector where a healthy competition between different projects should be available. The most important thing is to provide a huge mass of poor singular investors with various opportunities to invest in real-world’s assets and commodities through cryptocurrencies.
What can be a business model for such applications? Many options can be considered beginning from collecting small service fees and up to using a specially created blockchain with its native cryptocurrency. The latter implies a brighter strategic perspective for its creators once quite an organic network effect seems to be inherent in a crypto asset backed by groups of people owning certain real-world valuables. Such a solution can offer its services to the users even for free while getting profit from the growing price of its coin in public circulation. Besides, calculations and payments in a native crypto coin are always profitable for the coin’s issuer.
Truth be told, the proposed concept may look barely attractive for many contemporary crypto entrepreneurs who are looking for a fast way to make a lot of money. The project implies quite a significant managing routine when numerous interactions between the owners of real-world assets and various crypto providers should be established. Significant efforts in the creation of a specific community of small investors will be needed as well. In other words, the project fits some socially responsible DAO such as Bitnation, for example (not necessary Bitnation in particular, but I will be happy if such a powerful advocate of decentralization and fair wealth distribution as Bitnation embraces the challenge of building something similar to the described system).
I hope this idea can meet the other enthusiastic crypto practitioners interested in maintaining an effective social justice. My mission is just to articulate some possible opportunities to make a relevant discourse appear. I believe that discourse creates phenomena. Let’s see how soon a described crypto phenomenon occurs. Thanks a lot for reading.
