Real-World Crypto: How DeFi Can Help Millions of Farmers In Africa and India
Day 1 into my explorations of how crypto can solve REAL problems. Smart-contract based crop insurance can solve real problems for millions of farmers around the world.
The Real Problem
Climate-related risks threaten the livelihoods of hundreds of millions of farmers globally.
These farmers can benefit from crop insurance to protect themselves from unpredictable weather patterns that destroy their yield.
In developing countries in Africa and Asia, farmers often lack access to such crop insurance.
Moreover, in many of these countries, the court systems are so inaccessible that they might as well not exist.
Farmers need to know that insurance money will come through if the weather fails them.
If court systems cannot be relied upon (or at least not easily), then insurance is effectively worthless because farmers won't have any guarantees whatsoever.
Corruption, fraud, and opaque data systems are additional obstacles that farmers need to overcome to actually get paid by traditional insurance firms in developing countries.
How Crypto Solves the Problem
Decentralized Finance insurance products let farmers enter contracts with insurance providers that are automatically enforced by code. This means:
Guaranteed payout if climate risk conditions are met
NO risk of fraud, data manipulation, or corruption
NO legal expenses or delays
Real-time payouts
Transparent rules and data
Global insurance pools = competitive rates (no predatory insurance)
If you don’t know what smart contracts are, or how they work, watch this 2-minute animated video.
As Sergey Nazarov (the founder of Chainlink) puts it:
"You can basically codify a farmer's relationship to risk in the form of an on-chain insurance contract."
I’ve said it many times before and I’ll say it again:
🤔 But why are smart contracts better than legal contracts?*
(*often)
Court systems can only enforce retroactively, and the enforcement mechanism is also orders of magnitude more expensive and time-consuming.
Code can enforce in real-time, and the enforcement mechanism is MUCH cheaper in terms of both time and money. And you’re guaranteed a payout if your contract conditions are met.
Next time someone asks you if crypto can solve any real problems - please share this article with them - this problem is REAL for hundreds of millions of farmers globally.
Related Thoughts
Anytime the unit costs can be reduced, more solutions can be unlocked.
With smart contracts, the unit cost of enforcing contracts is reduced by orders of magnitude.
This can unlock other, smaller use cases too.
As an example, travelers are often legally entitled to compensation for flight delays.
However, most people would never bother to claim it because it's not worth the cost or hassle.
But if this were encoded into a smart contract, the refund would be instant and guaranteed, with no cost or hassle.
(Currently, companies like Airhelp exist to solve this and help people get compensation from airlines)
Imagine how many legal contracts are not actually enforced because it’s too expensive or time-consuming to do so.
Now, what happens if you can write those contracts in code?
Feel free to comment, or reply with your thoughts.
I'm always open to discussion and debate. You can also reach me directly at @shivsakhuja on Twitter to chat, explore ideas, collaborations, or anything else.
It's refreshing to see how blockchain technology is being used to create financial solutions that are accessible to everyone, not just the privileged few. I appreciate your insights on the potential impact of DeFi on remittances, savings, and even philanthropy. Looking forward to reading more from you!