Obstacles Facing Middle Income/Developing Countries That Can Be Addressed By the Blockchain and Cryptocurrency
Cryptocurrency has been attempting to be a successful disruptive technology impacting the developed world. However you might be surprised to hear that cryptocurrency is predicted to make the biggest impact on the middle income or developing countries. It can be asserted that many obstacles faced by these countries such as hyperinflation, limited access to safe and secure banking, limited financial transparency can all be addressed by the introduction of cryptocurrency. The blockchain movement can allow the developing countries access to the modern global economy.
There are some main financial factors that are obstructing the developing countries from progression. Hyperinflation, lack of access to safe and adequate banking, lack of capital and finally restrictive access to world wide markets. All these factors will be explored further in this article.
Hyperinflation is one of the main obstacles faced by middle income or developing countries. It contributes to countries financial value and the financial security of the people living in those countries. Hyperinflation noted by economists are caused by cumulative decades or longer period where there was poor economic management, war and or colonialism. Countries such as Venezuela have attempted to combat this issue by heading towards a Bitcoin friendly society. This has been giving the residents a sense of assurity knowing that there savings will not be altered even if the local country’s currency crashes.
According to Forbes and the World Bank, 10.7% of the world’s population lives on less than $1.90 (USD) a day. This equates to approximately 750 million people living under the global poverty line. In the Forbes article the author argues that financial inclusion has been a main factor contributing to the reduction of poverty. If we want these numbers to fall and get more people above the poverty line, one way to achieve this is by giving more people access to safe and secure banking. Financial inclusion can be defined as access to banking and saving options, however approximately 2 billion adults remain unbanked.
The introduction of cryptocurrency and blockchain technology to the masses, especially in developing countries can reduce global poverty. Blockchain is a decentralized system not requiring a physical presence. Unlike private banks there is no need to spend money on infrastructure, complex middleman solutions and can reach anyone who has access to data. Blockchain is also transparent making it a viable tool in limiting financial corruptions as there is a digital footprint for all transactions.
In accordance to some research published by Bitwala (global blockchain based payment provider), many people in the developing countries have noted that the current banking system favors corporate profits over people’s needs. With people experiencing challenges such as multitude of fees when sending money abroad. In contrast the Blockchain technology is attempting to make all financial transactions faster and cheaper by eliminating the unnecessary middle men.
Lack of capital to start ventures is also a contributor to global poverty. Crowdfunding tools such as kickstarter that have been so successful in enabling people to create and develop unique businesses are not available in these countries. The Blockchain will give an alternative and more accessible channel to raise such funds.
Transparency, especially financial transparency is vital for economic progression. Developing countries statistically have fallen prey to a large amounts of financial scams due to lack of transparency. The Blockchain acts like a ledger, there is a digital footprint of all transactions, this allows consumer confidence especially among the more vulnerable who may be skeptical due to prior experiences.
An example of this is land grabbing, land grabbing is financial fraud, where the deed ownership has been manipulated.Land grabbing has been a significant problem in developing countries, this can be addressed by using the blockchain. By using a blockchain ledger coupled with smart contracts created by Ethereum (a cryptocurrency) can prevent these groups of people from committing financial fraud. Ethereum blockchain can be used to store proof of property such as deeds and land titles. By the utilization of blockchain technology, ownership manipulation and fraud can be minimized drastically.
Paul Domjan, global head of research and data at Exotic (one of the leading investment banks of the developing countries) stated that blockchain will make its biggest difference to developing countries as it will allow these countries to skip a few steps. Cryptocurrency has the ability to leapfrog the developing countries to the modern 21st century by giving the masses equal footing in investments, adequate access to a safe banking option, ability to start a business, receive or send remittance to family and friends abroad.