Sometimes it’s hard to see how cryptocurrencies can be tied to real-world physical industry processes. That’s where investors can get a great example from Sentinel Chain, a complex token setup with the capacity to change cattle farming and integrate a very new technology into a very old form of commerce.
Today at CryptoPotato, Yonatan Govezensky is talking about SENC as a unique type of utility token demonstrating a stablecoin approach to cryptocurrency, and applying these heady technologies to very specific farming practices in the country of Myanmar.
“Sentinel Chain is solving a real-life issue by using blockchain technology with a highly motivated team,” Govezensky writes. “If Sentinel Chain succeeds in Myanmar, they will move on to scale their service worldwide, as currently, there is no affordable insurance and loan ecosystem for livestock … not only has the business been running according to plan, but the team behind Sentinel Chain is also highly dedicated their community and the price of SENC token.”
Documentation around Sentinel Chain shows that it was set up to facilitate cross-border livestock transactions and financing with local stablecoins referred to as Local Currency Tokens or LCT.
This idea, which is still in pilot stages, is practically brand new: Sentinel Chain raised $14 million after an ICO this past March, with some substantial capital sponsors on board. The idea is to use cattle as collateral for financing, and leverage token technologies to back the value of what the farmers are ultimately selling.
In this case, Myanmar is the early adopter, where millions of animals utilize a livestock ID tag that’s part of the Sentinel Chain ecosystem. A CrossPay mobile application helps to process the data.
In a market where a total of 17 million head of cattle is valued at over $24 billion, the Myanmar cattle business provides an economy of scale to see how the complex use of tokens will work to back livestock trade. A projected large volume of sales from Myanmar to China will add to the “laboratory” for SENC implementation.
In looking at the potential issues related to this ground-breaking method, a Medium piece makes a critical point about the use of Myanmar’s currency (MMK) in critiquing a SENC-backed stablecoin method where SENC is used as collateral to back LCT operating on a negotiated collateral ratio between the stakeholders.
“To address currency exchange risks and volatility, we have to use certain assumptions, one being that SENC appreciation against USD has to be higher than MMK appreciation against USD,” Ng Ling Soon writes. “Since developing countries’ currencies tend to face higher levels of inflation and SENC’s value increases in demand with LCT, therefore the probability for this risk is lower in the long run.”
Another reality that the piece points out is a lack of liquidity for LCT/MMK based on its position in the market.
Those caveats notwithstanding, Soon’s lengthy explanation of Sentinel Chain illustrates the how, the why and the logistics of making cattle farming a digitally backed process.
There is a wealth of technical information to dive into to get a better idea of how the Sentinel Chain works and how it’s tied to the local cryptocurrency tokens – but on a broader level, this stablecoin initiative reveals a key way that companies can innovate to break into markets that you wouldn’t think of as affiliated with tokens or other digital valuation approaches.
The company talks about “unlocking the value of the unbanked farmer’s cattle” – and that’s a real philosophy behind a lot of cryptocurrency initiatives that seek to permeate markets that previously were part of a ‘dark continent’ where digital banking was concerned.