Blockchain Revolution: Empowering Developing Countries
|— Blockchain is a distributed ledger that records data transparently and securely without the need for an intermediary.|
— Blockchains can improve the existing infrastructure of developing countries and offer the basic rights to the unprivileged citizens of those countries.
— The impact of blockchain is multifaceted. It offers the possibility for better financial inclusion and security, reduced scams in the name of welfare programs, improved land registry process to reduce frauds, a digital identity for people who don’t yet have it, and reduced corruption in the political system.
The Blockchain revolution is here and there’s a great chance it will empower developing countries. Let’s find out how.
As citizens of developed countries, we find it ordinary to have access to fast internet, banking services, a national identity, and basic human rights. In a life where we get all our basic needs fulfilled, we often fail to notice that these “basic” elements of our daily lives are luxuries to billions of people from developing countries.
There are numerous reasons why, failing, over-centralized, and corrupt governments and officials, inflation-stricken economies, the lack of proper resources for entrepreneurs to develop adequate infrastructure, and the list goes on.
Thankfully, the advent of blockchain shines a ray of hope on the hundreds of millions of citizens of developing countries who so desperately seek change. Blockchain can empower citizens directly by reducing their reliance on centralized, inadequate, corrupt, and opaque systems.
To answer your “how,” we need to understand what blockchain is and how it operates.
What’s blockchain and how does it work?
Blockchain is a distributed ledger that can do only one thing — record data and information immutably. This information could be anything from the details of a money transfer, digital identity, ownership record of a digital collectible, or your mark sheet where you scored terribly.
You can compare blockchains to wheels. Wheels do one and only one thing — they roll. But the way they’ve changed how things move is awe-inspiring. From moving luggage to airplanes, wheels help the world roll in style with full efficiency and speed.
Similarly, what gives blockchains the real potential and rationalizes the hype around them is the way they do what they do. They provide a global, immutable, transparent, and decentralized way of storing data.
Blockchains are decentralized and are operated, updated, and secured not by a central entity but by peers using the blockchain. Anyone can participate in a blockchain and become a node to collaboratively govern and operate the network.
In simple words, blockchains create a network that is operated and governed by the common people and code instead of laws and institutions. There could be hundreds or even thousands of peers for a blockchain who become nodes to help process transactions and write new records on the transparent digital ledger.
And a majority of the nodes must verify a piece of information through a consensus protocol before it is added to the blockchain. This makes the blockchain almost impenetrable and tamper-resistant.
Blockchains also support self-executing digital contracts called smart contracts. These smart contracts are used to develop various applications that can disintermediate and automate several business processes, thus reducing manual intervention and the scope for errors or corruption. They together create a system that’s everything corrupt middlemen would hate.
How blockchains impact developing countries
Blockchain has a vast potential to impact the lives of people in developing countries. Let’s take a look.
Financial inclusion and security
Speaking of our financial system, it is noteworthy that 2.2 billion adults across Africa, Asia, Latin America, and the Middle East remain “financially unserved.” The World Bank reported that more than 1.7 billion adults throughout the world were still unbanked as of 2017. Of these, over one billion have access to mobile phones. You see, phone manufacturers performed better at reaching people than the banks.
This is mostly because of the operational and infrastructure cost of the existing system. On the other hand, a global, decentralized payment infrastructure over a blockchain is significantly cost-effective, and its services can be accessed using a mobile phone. Multiple blockchains and crypto projects are already aiming to bank the unbanked population of developing countries to further financial inclusion.
Apart from that, imagine what a nightmare it must be to see your life’s worth of savings melt down due to hyperinflation? Sadly, that’s a fate many across countries like Venezuela have faced.
Blockchain wallets can enable citizens of these hyperinflation-stricken countries to store fiat-pegged stablecoins such as USDT or cryptocurrencies like BTC which will offer them better financial security. Banks, of course, can hardly enable us to do that.
Furthermore, migrants from developing countries pay between 5% to 10% to remit money back to their families. Blockchain-based payment systems and exchanges allow these migrants to feed their families at an expense of just 1% to 3%. Some third generation blockchains even charge a transaction fee of less than 1%.
The scams presented as welfare campaigns are the toughest to spot. For instance, up to 40% of the welfare payment in India does not reach the intended recipient. We don’t really know where the funds go… or do we? We’ll let you answer that.
The only way we can assure that the money reaches the people who need it is by ensuring it doesn’t vanish midway. To do that, we need a transparent system… which brings us to our beloved blockchain. Blockchains can record every transaction, every movement of the funds on a public ledger. This will force the middlemen to carry out their tasks without trying to falsify records. No more chances of passing money from beneath the table or hiding something inside the pockets.
When donors know exactly where their funds are going, more of them will come forward and make contributions, thus aiding welfare programs to help more needy people from developing countries.
We are already seeing real-life implementation of this. In fact, even the United Nations used the Ethereum blockchain in 2017 to send funds to Syrian refugees in Jordan.
Digital identity and ownership
Citizens of African and South Asian also deal with fraud and corruption in property and land occupancy rights. A vast majority of the land in these countries is not registered in any government database.
Blockchain-based land registry systems can simplify the registration process and help more people get their properties registered. With the records of properties registered on a tamper-proof and transparent ledger, it will be nearly impossible to cheat someone to seize their property.
Speaking of documentation and registrations, blockchains are also the way forward for offering unprivileged people national identification documents. Having a national ID can empower them to open a bank account, vote in elections, or use government services.
Whether or not we like to admit it, most things about politics are a bit shady to say the least. For one, corruption in the voting system plagues many countries. Using a blockchain-based voting system to register votes can ensure that no one can tamper with the vote count or register multiple votes without everyone noticing the change.
Besides, if combined with digital identities stored on a blockchain database, the voting procedure can be completely digitalized and made more secure. This will make voting more efficient, and save a considerable amount of money and time spent on elections.
With the transparency they offer, blockchains can also help reduce government corruption, as discussed in the above sections.
You may be thinking, well… easier said than done. Right. The transformation we just discussed is not something that can happen overnight. It will take years of collaborative efforts between organizations to bring about that change.
Blockchain technology certainly has the potential to catalyze the process to a great extent. If done right, we believe, the implementation of blockchain technology can create a more equitable society and impact the lives of billions worldwide.
Knowledge is power – so keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video What is Money, Really?