Blockchain- A solution to the curse of poverty - Last updated on 30th Sept 2019
Blockchain is the next industrial revolution that will solely or partly remove poverty and be used purely as a good force to better humanity.
The world has transformed from stone age to the age of robotics. We have seen transformations in every aspect of living, work and industrial development. Talking about industrial and technical evolution, the future seems to be automated, interconnected and decentralized.
Until now, we are searching for ways to enhance security, speed, robustness, agility and transparency. We still have a long way to go in order to find real life secured, interconnected and decentralized solutions.
Here are a few problems and why not can we solve them using the existing technologies.
I belong to a country where poverty is a big debate as almost 29.5 percent people live below the poverty line. I am a Pakistani, and through my childhood into my adulthood, I have constantly seen my country breathing on donations.
Let us now look into how and what will the next industrial revolution do to solve these problems or at least reduce them.
Let's deep dive into it
Blockchain might be the most controversial and polarizing technology of this decade. In its easiest definition, Blockchain is a peer-to-peer networking system for keeping your records in decentralised fashionb. These records can be of any type like medical records, transactional records or even call records. These can never be deleted or forged as they are permanently stored (immutable). The invention of cryptocurrency has added a whole new dimension to the digitization of the global economy.
Pakistan is a country struggling to grow like many others. According to an article by David Gyori, CEO of Banking Reports, the number of banks worldwide is 25k, which may vary. Pakistan’s banking industry constitutes a total of around 31 banks, of which five are public-sector and four are foreign, while there are 22 local private banks. The number of bank accounts amounts to 49 million in a total population of 217 million. There is a great size of the unbanked rural population. While the number of transactions per second and per banks may vary from a couple of 100’s till couple 1000’s, are all these transactions transparent?
Moreover, a study conducted by Pakistan Centre for Philanthropy shows that Pakistanis give around Rs 240 billion annually to charity. The report indicates that about 98 percent of people in my country give for charity, in one form or another. But does all this charity go where it is supposed to be? Do the deserving actually get all or any of this?
Not to forget one of the key parts of any economy is “Bureaucracy”. You can hardly find a nation without the intervention of it and bureaucracy finds its application in every domain. It gives rise to many ills like corruption, delays, cost, etc. In developing countries like Pakistan, implementation of the same law is different for the rich and the poor. People have been searching for methods which can help them fight it and come up with a system which is more transparent, quick and secure.
All the above mentioned issues are not only tagged to developing countries but they exist in most developed countries as well, corruption being the most common of all.
Corruption strips the poor of their basic rights, causing the value drop of the currency, leading people to switch to foreign currencies, the phenomena we all know as “hyperinflation”. The characteristics of the Blockchain are themselves an answer to all the above stated problems. Here are the basic characteristics of Blockchain:
- Enables the currencies limited in number.
- Uses a decentralized peer-to-peer transaction system. Every transaction first gets verified by the mediators (miners) and then it gets recorded in a public ledger.
- Easy accessibility,with no interests. Anyone can have a software wallet where you can keep your digital money ,by paying little or none at times.
The first point helps in minimizing the hyperinflation. With limited amount of coins in the market, currency becomes deflationary. You could carry out cross border transactions without having to convert it to another currency that might also reduce your buying power. This is not only important for sending remittances into your country without having to go through all the restrictions but also for businesses which are involved in import/export.
The second point is the answer to corruption. Everything happening is out in the open, for everyone to see. No more alias accounts sending tons of money abroad without getting any verifications.
The third point enables inclusivity at its best. With less or almost no fee, anyone could have access in the comfort of their home. Not only that, with the introduction of crypto-tokens the accessibility to even real estate has increased tremendously. Most companies allows consumer to invest in the property token for as little as a dollar.
Conclusion:
Can blockchain actually re-design the payments transaction and other systems such that it enhance security and transparency and eventually eradicates or reduces poverty?
Blockchain technology provides a high level of immutability and some degree of security in storing and transmitting data, open and transparent network infrastructure, decentralization and low cost of operations. In order to make transactions through blockchain we simply need to download an app and create a wallet. This wallet is your personal decentralized bank account. Any transactions made through blockchain are secured on the blocks and this data cannot be altered or deleted. A copy of every transaction is shared with all the nodes on the blockchain to ensure transparency. This makes sure no forging of data occurs.
According to an article by Anup Shah, almost half the world — over three billion people — live on less than $2.50 a day. At least 80% of humanity lives on less than $10 a day. These figures are alarming. But what role can Blockchain technology play here?
Unfortunately, for poor people it has become very difficult to open a bank account and/or get a loan to improve their lives or build a business. Either they don’t have the right ID or they don’t have a credit history, which makes it nearly impossible to get access to banking facilities. Blockchain will increase access to banking (as it works all online, no physical banks will be needed to save or transfer money). In addition, creating a decentralized database for the poor makes ‘being poor’ a lot less expensive.
Blockchain provides availability and access of rule of law and respect and ensures all documentation to be free from the risk of being forging. Blockchain and smart contracts can be used to transform legal contracts into code, which is understandable and indisputable across legal jurisdictions. This saves a lot of cost and effort this can enable everyone, even the poor, to acquire justice. Now even the poor can acquire loans for initiating businesses and this eventually lowers poverty.
The implementation of blockchain will enable unnecessary mediators to be abandoned and provide customers and banks with cheaper services. Hence this prevents possible corruption and illegal money transfers. The speed of transaction is way faster and transaction charges are minimal which increases blockchain’s usability. Banking and financial activities directly relate to insuring deposits and loans. Even in developed countries most of these banking functions are often criticized for being unreliable and vulnerable.
A distributed system based on ledger technology for loans and deposits is decentralized, and, since the deposits are not controlled by one organization, the system cannot go bankrupt. This technology could have a tremendous impact on the procedures for concluding and confirming transactions, managing cash, and optimizing assets
Implementing blockchain ensures reliability, security, transparency, efficiency and equality. Blockchain levitates financial inclusion and contends corruption, all contributing to reducing poverty and vigorous development.
All we need is:
-Training; explain crypto and educate users on its practical uses and benefits i.e for example, through online videos in local languages.
-Tools to receive crypto and transact in emerging markets i.e a way for people who have limited internet access cryptos.Companies like CoinText.io are developing technology which allows users to send cryptos through text messages.
-Security: A hot wallet or cold wallet to safely store assets.
And above all we need is global acceptance.
Having said that, when it comes to global poverty, there is no one solution that fits everything. But, after a long time, with this technology we could safely say that we might move in the right direction. Blockchain has its own challenges that need proper legislation. All of us should work together to get its global acceptance and that is why I chose this topic to put forward today. Blockchain is the only reasonable and the right blend of the solutions to eradicate the biggest curse of poverty.