Mango Markets — The Origins (Why?)

The first question that any person that wishes to undertake an innovative project should ask themselves is ‘What problem are we trying to solve?’.

Dreamers that get carried away by their grandeur plans (or by greed) are often frustrated when virtually everyone else they cross paths with, particularly those in the entreprenurial ecosystem they are seeking help from, bring them crashing to the ground by asking that simple question.

If you are unable to articulate clearly and concisely what the problem is, chances are you are creating a solution for a problem that does not exist.

Tech trends

Technology has been reshaping most industries and creating entirely new ones over the last few decades. Some of the major defining trends, and the problems they have attempted to solve are:

  • Ability to reach users anywhere, anytime. Removes the traditional limits imposed by only being able to service people within a narrow geographical location. I.e. Online shopping.
  • Technology has significantly brought down the cost of production. This has resulted in a transition from there being few companies leveraging economies of scale to produce a couple of products in large quantities (one size fits all) to a lot more companies creating a high amount of custom products in smaller batches. It is possible today to start a successful business by focusing on narrower groups of the population (i.e. 65+ year old retirees living in warm weather location away from their hometown)
  • Connecting people in unique, new ways, that bypass traditional intermediaries and generate an immense amount of value. Also known as the sharing economy. Examples are Uber — passengers and drivers can connect directly, AirBnb — hosts and travellers can connect directly.

Venezuelan Trends

While the rest of the world leaped ahead into the future at remarkable speed, Venezuela slowly stalled and started regressing back in time.

The only identifiable trend is a total lack of investment from the government in basic infrastructure leading to crippling internet speeds and insufficient electricity with constant blackouts. Combined with policies that have expropriated existing successful businesses and bankrupted them, scared away all foreign investment, and forced millions of young people overseas.

As technological progress was non-existent, the only trend worth mentioning is a political trend. The creation of a society that is highly dependent on the government for even the most basic needs, yet one that is very generous to those who become avid supporters. Government contracts with astronomical overprices, and outright theft and extortion with total impunity, are the only industry that has been flourishing in the country, minting millionaires every day.

While the rest of the world was creating ‘Fintech’ (financial technology) to challenge old financial institutions and bring better, fairer services for the masses the Chavistas were robbing the country blind with Cadivi (currency control) while blasting socialist propaganda at the poor vulnerable people who once supported them.

What problem are we trying to solve?

Surprisingly, when asked this question about our new project in Venezuela, we still struggled to find a coherent way to answer. Not because we weren’t solving a real problem. No, we were arguably tackling the biggest problem affecting the country right now. The reason why we struggled to answer is because, simply put, the entire country is an amalgamation of hundreds of problems closely intertwined (‘epically fucked’).

The problem originates with currency controls. And can be broken down into the following logical stages:

  1. Introduction of currency controls. The exchange rate between the US Dollar and the Venezuelan Bolivar is now arbitrarily set by the government.
  2. The main source of foreign currency is from the oil industry. The main recipient of foreign currency and holder of dollars is the government.
  3. Even though they determine the exchange rate, and have the power to change it at any time. They ignore supply and demand forces, refusing to sell their dollars at the price they have established.
  4. Demand for dollars is greater than supply. Creating a thriving black market — a parallel universe where buyers and sellers of dollars can agree on price.
  5. As it is technically illegal, the black market is plagued with inefficiencies such as lack of transparency and accountability as the price is set by a random website (dolartoday.com), and widespread fraud as victims cannot approach the authorities to denounce the crime.
  6. Buyers and sellers are not able to find each other. Resulting in sellers selling too low, and buyers buying too high, and a lucky few in the middle making millions. High volatility.
  7. As the economic crisis worsens (in large part driven by the currency controls and all the economic distortions it creates) millions of Venezuelans move overseas.
  8. Venezuelans start working very hard, earning is foreign currency and supporting their families. They need a way of sending money to their family, but many don’t know anyone who buys dollars, as saving in dollars has traditionally been a middle and upper class measure. (always the poorest are the most vulnerable to exploitation).
  9. The price of oil falls. The oil production of PDVSA also drops. The regime is at the brink of bankruptcy. Sanctioned due to the brutal repression of widespread protest resulting in multiple deaths, they are unable to obtain financing in the capital markets.
  10. Remittances keep increasing daily. Slowly becoming the main source of income for most Venezuelan families, and a significant source of foreign currency.

The problem: Venezuelans have been deprived of the ability to take control over their own finances. Basic actions like saving in a strong, stable currency or transferring money to support family are unnecessarily complicated and painful.

Our humble solution…

We wanted to create a simple market place where buyers and sellers could meet, agree on a price in a fair and transparent way, and exchange funds in a secure and rapid way.

Mango Markets achieved that by using cryptocurrencies (digital currencies). Digital currencies are a medium of exchange for the digital world, enabled by new protocols (blockchain technology), it is often compared to the cash of the internet. We will be explaining a lot more about this technology — how it works, use cases, why we should support it — in subsequent blogs.

Our simple exchange platforms enabled users to register, verify their identity by providing some personal documentation (required to comply with international Anti-money laundering (AML) and Know-Your Customer (KYC) laws), and deposit Bolivares, Bitcoin and Later Ethereum.

The exchange consisted of two order books — one for the buyers and one of the sellers, as well as a transaction history and a graph. Everyone could see how many people are selling, and at what price, how much money has been transacted and at what prices (determine trends), and have the freedom to choose at what price to buy/sell — creating an order does not guarantee it will be fulfilled. An efficient market need a buyer and a seller agreeing in a price.

The next chapter

In the current political climate, our centralised exchange suffered an early death. We will be elaborating more on the challenges we faced, and the reasons why we had to stop operating. However, we keep continue working on different solutions. Focusing on several specific problems we believe we can have a significant positive impact through the implementation and use of decentralised blockchain technology.

A moral duty.

Finally, we feel like we have a moral duty to pay it forward. The Mango is comprised of individuals that have been privileged in many ways. Starting with access to excellent education in Venezuela and overseas, being at the right time at the right place giving us access to the latest technology and capital.

Today we have tools that we did not have before. The answer to many of the problems the country is facing drastically changes, shifting from desperation and a sense of defeat to optimism and hope. We feel like we are in a position to advance part of this technological movement that will reshape the country, and would like you all to join us.

Alejandro is the Founder and CEO of Mango Markets. A leading Cryptocurrency Exchange in Venezuela that halted operations due to regulatory uncertainty. The Mango Markets team continues working towards providing decentralised technologies solutions to the people that need it most.