Can CryptoCurrencies Reduce Poverty?
By Mohammed Ahmed
Many tech start-ups claim to be changing the world. One can often be left wondering how much of an impact a taxi-hailing app can have on the world.
In reality, many tech start-ups are changing the way certain industries work. Uber has changed the transport industry at local levels which have translated across the world. Tinder has connected the unconnected into a world of dating, facilitated the loss of face to face interaction to hopefully get a face to face interaction — it basically gave online dating a speedy alternative.
CryptoCurrencies & Blockchain
The simplest way to look at it is that this is money and it is digital. Not an entirely new concept, banks have been storing our money digitally for decades. Hard cash is no longer stored in vaults and money boxes.
PayPal made one of the first forays into spending money separate from a bank account and remaining digital. Now we have many cryptocurrencies that have emerged, and it began with probably the most famous digital coin of them all; Bitcoin (BTC).
Satoshi Creates Bitcoin
Bitcoin came about as an idea of having a storage of wealth which was decentralized from any government entity. The financial crisis of the early 2000’s burned the faith that people had in government controlled and issued currencies, known as fiat currency.
I won’t go into a full history lesson, but this crisis is one of the main touted drivers behind the creation of Bitcoin by its mysterious creator, Satoshi Nakamoto. A decentralized currency that is independent of any bank or government.
But, can it reduce poverty?
Is there the potential for it to do so?
Sending Money Back Home
For the sake of this topic let us look at the technology around today for the remittance process, and how lesser developed nations leverage the protocols existing today. Remittance is the process of sending money back home, usually, someone leaves their country of birth but continues to send money home whilst working overseas.
According to World Bank figures, remittance to developing countries in 2016 amounted to $429 Billion. The global average cost of sending $200 was 7.45% in 2016. Nepal, for instance, has 31% of its GDP accounting from remittance alone.
If $200 was sent from Miami to a friend in Russia they would receive $185. That is before taking into account any further losses from currency fluctuations. This is where cryptocurrency comes in. One Bitcoin is worth one Bitcoin everywhere, providing Bitcoin is an accepted form of payment.
The next obstacle begins here. Access to the internet is required to be able to make transactions. With UN figures stating on their website in 2015 that an estimated 90% of the populations in developing nations still do not have access to the internet, this remains a major obstacle in the adoption of cryptocurrency.
New Technology, But The Same Old Process
The process for receiving payments today is one that is institutionalized. Here is a common situation:
Someone transfers money using Western Union. People receiving money in rural areas have to journey to towns where Western Union transfers are possible and provide identification details to collect their payments.
If people used cryptocurrencies instead, the lack of internet connectivity would fuel the rise of crypto exchanges. People would charge a commission to pay their bills in order to facilitate the services. Thus, bringing us back to square one, a $200 transfer would still mean less than $200 received.
Some cryptocurrencies such as Stellar (XLM) and Ripple (XRP) are designed to make the money transfer process faster and cheaper. Fees could be reduced but then the question arises, cheaper for whom?
Would the end user receive extra money, or would the money saved in transfer costs be used to boost company profits for the company executing the transfer?
Whilst cryptocurrencies are offering solutions, their application in reducing poverty isn’t the best right now. They offer a different perspective to an existing infrastructure in developing countries. Currently, someone charges a commission for foreign exchange, tomorrow they will charge a lesser commission if the cost of transferring is less, but a fee to facilitate a crypto exchange will take it’s place.
The Foundation Needs To Be Built
Cryptocurrencies will have their place eventually, it remains to be seen whether they replace fiat currency.
Can they reduce poverty today? No, not yet!
Internet connectivity is required to open up opportunities. Figures from the International Telecommunications Union state that just over 20% of Africans have access to the internet. Globalshapers.org supports a campaign advocating #internet4all and we should also support this.
The conception of the internet is seen as an industrial revolution in itself and that has opened the door to a world of opportunity, yet many in the world do not have the keys to this door.
When we think of poverty, shouldn’t we think about solving food, water, and education first?
The answer is no!
Eradicate Aid, Foster Self-Development
Providing aid, conditions people to expect the aid. It does not inspire or inform on how they can create their own opportunities. Providing connectivity opens the door to education! If I am a craftsman making wooden sculptures in a remote village in Kenya I have a very limited reach. If I had the internet I could have access to online courses and learn how to add e-commerce skills to leverage my craft better. I could even link to Instagram and sell directly to customers all over the world.
As a villager, with access to the internet, I would be able to learn from Massive Open Online Courses (MOOCs) or simply from DIY tutorials on Youtube, how to sanitize my water sources or provide my children with more nutritious food from sources around me.
If I want to work on a project, the internet will allow me to research and source the best products to fulfill that project. I can shop around and save money whilst doing so. The internet is what should be considered as the next step in reducing poverty.
Connecting The Unconnected
Should cryptocurrency become a widely accepted form of currency, with peer to peer transfers costing nothing, I would want to be able to accept these transfers.
Before cryptocurrency can be seen as a game changer in reducing poverty we need to first allow the conditions for success to be established. We have seen Bitcoin millionaires created and that was through early adoption of the concept. A major portion of the developing world missed out by simply not being connected to the internet.
The globalized world is connected and if we are to take steps in reducing poverty we need to give the unconnected the opportunity to get connected. Only once we are taught to read are we able to learn for ourselves. The same should be said for global opportunities.
If we can start #internet4all trending then the global community may wake up to taking steps towards providing the connectivity for everyone.
Google, Facebook, and others have shown support for similar schemes because they see the potential is there to be unlocked. Help us provide the key with your support.
#internet4all
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