Blockchain Blog 05: Blockchain to Eliminate Poverty?
In a previous blog, we saw why for 5,000 years gold has been the best store of value. It’s incredible that today if you need to leave $5,000, for someone, for your daughter, not your daughter or your granddaughter, or any 40 generations from now, 900 years from now. We don’t know how to do that. If you leave it in just dollars, it’s not going to be worth very much. We know of no security, that will last that long. The only thing that we know can carry value for that long, is you need to buy $5,000 worth of gold, lock it in a vault, and give the key to that person 900 years from now. Bitcoin is known as digital gold because it is something that is incredibly similar and superior to gold in each one of these six characteristics:
- It’s much more scarce than gold.
- It’s durable
- It’s divisible
- It’s transportable
- It’s recognizable
- and it’s fungible
There will never be more than 21 million Bitcoins. It’s much more divisible than gold. Bitcoin is composed of a million pieces called Satoshis. You can attach a Bitcoin to an SMS message, or, or an email and send it for free and in real-time across the world. And it’s incredibly easy to verify. The second you get a Bitcoin, you know that it’s a good Bitcoin.
Bitcoin: Ledger that needs no bank
What Bitcoin creates is a ledger that needs no bank. And that’s actually pretty important because if you think about what is a bank, at least as far as the money transfer and the checking and the savings, not the loan part, but the financial, the moving money part of a bank, it’s really a secure ledger. The bank does not just have a little file, that says your account has $3,000 in it. They insist that when you write something, they make a note in their ledger, that $1,000 was transferred from your account to someone else’s account and so on. And that’s important to make it secure. Well, what the designers of Bitcoin created as a way to make a ledger that’s secure, and that everyone can trust, but that no one owns or controls. And this allows people to have money that can be, free of the influence of governments, which is both bad if you’re a government, and great if you don’t like what governments do, with their monetary policies. It lets the policy be set by consensus and software. So Bitcoin basically has found a way, to always know what the majority thinks. And by always knowing what the majority thinks, you get something you, you hope you can trust. In theory, if, someone controlled more than half of the computers in the world they could take over Bitcoin, but that’s pretty unlikely.
Cryptocurrencies for the banking system?
Let’s break the world up into two buckets, let’s look at the banked and documented world, and let’s look at the unbanked and undocumented world so the green bucket has about four billion people living in it in places like the USA, the European Union and then we look at places like China, India, and Brazil, and we start moving into the unbanked and undocumented world places like Sudan, places like Afghanistan.
If you look at every meaningful metric from infant mortality to literacy rates quality of life tends to get better with the more financial services and the more access the documentation that you tend to have.
So let’s elucidate this a bit with an example let’s take a look at two people
Jeremy is about 30 years old and he was born in the USA. He has access to a passport, driver’s license, birth certificate, etc. He has credentials, he went to a university, he has a good work history, he owns a house, he’s probably like somebody everybody knows. Now let’s take a look at his financial history, he has a bank account, he’s borrowed money before, he has several insurance policies so if he hits you with his car if his house burns down if he gets sick, he has the means to cover that via proxies, and he sends money to his mother in another part of the world every single month.
Now let’s meet Ahmed, he’s from the right circle of the undocumented world. He is born in Afghanistan. He doesn’t have any formal documentation, he has learned several trades but it’s very difficult to understand his work history. He has no documentation that he actually owns the house where he has lived there for two decades, he uses a bicycle for transportation and he has a very difficult to verify criminal history. Let’s take a look at his financial life, he lives in a cash economy, everything is cash. All of the money he takes with him, his credit, comes from friends and family all of his assets are uninsured. He receives money from his brother in India and that cost him 15 cents on the dollar the remittance cost, all of his agreements are verbal and he has absolutely no access to the internet.
Jeremy sends his money at a very low cost, it takes only a few days maybe it’s a few percentage points. On the other Ahmad’s brother pay 15% of the transaction. So let’s look at the numbers for everyone, the worldwide remittance business is about 540 billion dollars, 192 million people living away from their home countries send money to home, and that total of money is about 400 billion and the cost of moving that money sits somewhere between 8.6 percent to 12 percent on average, it’s a world bank estimate but it can be much higher depending upon where you live.
This is the tough reality for about 3 billion people worldwide.
Jeremy has low-cost access to credit, when he gets a loan, he can get a long loan for five years, 10 years, 15 years depending upon the asset. And the interest rates are fairly decent let’s say 5 percent to 10 percent. Now, if Ahmad had access to loans, he would have been able to come out to poverty.
Blockchain to Eliminate Poverty
The use of blockchain can help people in under developing countries and eliminate poverty. Think of a person who is living in South Sudan, Somalia, or Kenya regardless of the fact that he is having great intelligence and a wonderful idea, if he wants to start his own business probably he has to pay some bribes or he has to convince some officials or take a loan. Now he might never get a loan, even though he will get it he has to pay a huge amount of interest on that.
A few of the reasons behind these problems are:
- Government is poor
- All the bank doesn’t have security from the person because they cannot see any previous record of that person or they cannot see any authentic documents of that person
If we use blockchain in this scenario:
- First, that person doesn’t need any third party to rely on he can start his own business without even including any second person.
- Second, every public document related to that person will be available worldwide and because of blockchain the banks will be sure that these documents are not cheated with or they are not changed, so these are original, also the government will have a public check because of the transparency factor of Blockchain.
This bitcoin thing that everybody seems to be talking about actually has inside of it some solutions, and also like bitcoin many other cryptocurrencies have this transformative triumvirate, and there are really three things here:
Refer to previous videos to have an understanding of blockchain and smart contracts: 28Days of February: Blockchain and Cryptocurrency Research Blogs
So let’s bring this all together, let’s bring back to why we care about Ahmad. So what are his problems again:
- He needs reputation
- He needs credit
- He needs to be able to manage his risk
- He needs low remittance costs
- And he would love to be able to actually prove that he owns the land, that he lives on
- If he has to flee it, well blockchains enabled him to build a censorship-resistant always accessible digital history everything that he does, if he does it through a blockchain-based solution, it’s there forever and it’s completely disintermediated from his government. So it doesn’t matter who’s in charge of what’s going on the particular political whims, it’s there.
Just ask yourself this question to yourself, why doesn’t every human being on this planet have equal opportunities. Why do some people have to struggle more for their goals, just because they were born in a poor country, or in a country where the government is corrupt. Blockchain is not a solution to every problem, but the future of this world can be great if we let this technology grow in these areas. And we do need a huge amount of research. My blog is based on research and knowledge. Till now, I believe blockchain technology has the potential to change the way this world has been working for centuries and make it a better place to live for everyone.
Read Next Part: Blockchain Blog 06 — Cryptography, Security, and Crypto Wallets
Entire Series: 28 Blogs on Blockchain and Cryptocurrency
- 3Commas Review | Pionex Review | Coinrule review
- Ledger vs Ngrave | Ledger nano s vs x | Binance Review
- Bybit Exchange Review | Bityard Review | Jet-Bot Review
- 3Commas vs Cryptohopper | Earn crypto interest
- The Best Bitcoin Hardware wallet | BitBox02 Review
- ProfitTradingApp for Binance Review | XT.COM Review
- SmithBot Review | 4 Best Free Open Source Trading Bots
- Coinbase Bots | AscendEX Review | OKEx Trading Bots
- How to buy Bitcoin in India? | WazirX Review
- CryptoHopper Alternatives | HitBTC Review
- CBET Review | KuCoin vs Coinbase
- Fold App Review | Kucoin Trading Bot | Probit Review
- How to buy Bitcoin Anonymously | Bitcoin Cash Wallets
- Binance vs FTX | Best (SOL) Solana Wallets
- Binomo Review | Stoic vs 3Commas vs TradeSanta
- Capital.com Review | Crypto Lending Platforms in Hong Kong
- How to Swap Crypto on Uniswap? | A-Ads Review
- WazirX vs CoinDCX vs Bitbns | BlockFi vs CoinLoan vs Nexo
- LocalBitcoins Review | Cryptocurrency Savings Accounts
- What is Margin Trading | Dollar-Cost Averaging
- Uphold Card Review | Trust Wallet vs MetaMask