Most third-world countries are beset by poverty, high unemployment, hunger, disease, political turmoil, and social instability. Government corruption is rampant, and social instability is a fact of daily life. This means, for many, a lack of access to the local economic engine, banking loans, capital investment, and global markets. As first-world countries grow and thrive, the future seems bleak for the less-developed countries of the world. Some think that blockchain technology and cryptocurrency can play a vital role in aiding these countries in tackling their ubiquitous problems and rescuing some of the world’s most marginalized people from their desperate situation.
Enabling Money Transfers
One of the many important features of cryptocurrency is the speed and ease with which money can be moved across borders — really from one location to anywhere else in the world. Not only do transactions occur much more rapidly than with the legacy alternatives, but the transfer fees are substantially less. Over $400 billion is transferred every year to families in third-world countries from their relatives living as immigrants in first-world countries. In some of the poorest countries, these remittances can constitute more than a quarter of the national income. Ordinarily, transaction fees can total nearly 7.5%, and sometimes a great deal more. Anything that impedes these transactions, or carves off substantial fees, hinders this vital economic resource. Pioneering platforms such as SureRemit in Africa, Rebit and Abra in the Philippines, Circle, and WorldRemit based in London, all provide international cryptocurrency transfers quickly and at a low cost.
Providing Access to Banking
According to the World Bank, over 2 billion adults in the world have no access to banking services, and most of them live in developing, third-world countries. In some very poor countries, less than 15% of adults have bank accounts, and many of those that do still cannot receive the level of service that first-world customers would expect from their bank. Interestingly, many of these disenfranchised individuals do have mobile phones, and companies have sprung up to provide cryptocurrency-based banking services that can be accessed and utilized through mobile phone apps. Examples are MPesa, BitPesa, Coins.ph, and Toast, which permit users to send and receive money without the need for a bank account.
Another advantage of this type of banking is that cryptocurrency assets can be left in the cloud, which makes them less likely to get lost, stolen, or be destroyed in a fire or other natural disaster. Considering that many who would benefit from such services may live miles and miles from the closest bank, the added convenience is also substantial.
Empowering Micro and Small Businesses
Perhaps the most impactful use for blockchain and cryptocurrency in the third world is the ability to provide access to financial services to those who have little or no such access. After all, one of the most effective ways of improving a struggling economy is to facilitate the growth of small businesses through micro loans. This is money that will promote entrepreneurship, stay within the community, increase income to local families, and provide valuable products and services to the local area.
It is very difficult for individuals in third-world countries to find even the meager means necessary to start or operate a micro or small business. Once they are provided access to banking services through smart phone apps, they then have at least a minimal entryway into the world of commerce. M-Pesa, BitPesa, Nebeus, and other cryptocurrency-based financial platforms now offer small-scale financing.
Corruption touches everyone, regardless of the country in which one lives, but it has a much more devastating impact on the lives of third-world citizens. Money that is supposed to flow into the poorest communities is often diverted by corrupt government officials for their own benefit. The “smart contract” which controls the movement of digital assets between parties, is a protocol built into many cryptocurrency platforms. It adds transparency to all financial agreements by making every transaction public. Citizens would thus be able to monitor the actual allocation and use of government funds.
Another valuable use of the blockchain in third-world (and possibly several first-world) countries is to assure the integrity of the election process. In many third-world countries, the bodies which oversee elections are highly partisan, and election fraud is rampant. Moving the electoral process to a public, distributed, blockchain-based platform should help tremendously in increasing the fidelity, accuracy, and fairness of the election process.
The economies of countries such as Venezuela, which are highly dependent on a single commodity (in this case, oil), can stagger when faced with a change in the demand or price point of that commodity. This can lead to massive currency devaluation and the corresponding instability in local markets for goods and services. The ability of cryptocurrency, essentially a global currency, to be valued independently of the rise and fall of any local economies, makes it an excellent shelter for one’s assets. As the value of the Bolivar plunged, the demand for bitcoin skyrocketed.
A Safe Haven
Cryptocurrency offers its users an opportunity to shelter their assets, avoid government corruption and inefficiency, not fall victim to insecure banking systems, devalued currencies, and uncertain regulatory environments. While cryptocurrency itself is not immune from wild fluctuations and public and private skepticism, this is still an improvement over having your fiat currency become worthless, stolen by bandits, or seized by a corrupt ruler.
Cryptocurrency has not yet become the savior of the third world. It’s fees, though almost negligible for first-world users, are still quite high within the third-world context. For example, a single bitcoin transaction fee can be equal to or greater than the hourly wage of many workers in developing countries, which would be a deal breaker. In addition, cryptocurrency use can be overly complicated and daunting for the uneducated. Hopefully, these issues will be overcome in time, enabling fast, low-cost, and reliable financial transactions for those with a pressing need for them.
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How Will Blockchain Apply to the Third World was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.