Inclusive Growth and the Internet of Verification

Introduction

All things “blockchain” have caught the public attention with its extreme ups, and as of the time of this writing, downs. A disproportionate amount of attention goes to its speculative nature and not to its real potential. Blockchain and post-blockchain technologies will have a significant effect on commerce, value-chains, and the economy at large because the right kind of money used in the right way can create sustainable economic growth for the 1.7 billion people that at present are “financially excluded” and for the entire “informal sector” of another 2–3 billion people. Monetary instruments can create Inclusive Growth: an economic prosperity that is distributed more fairly, and sustainable growth for people and planet.

Economic disparity leads to social instability, which leads to even more disparity. People excluded from financial agency get stuck in low productive activities because they are not able to access financial services.

For blockchain and post-blockchain technologies to flourish these new technologies need to contribute to the alleviation of economic disparity and the democratization of productivity and money so that all actors can reach their economic potential. And, since these technologies have the potential to ensure that all individuals, families, communities, and businesses have access to useful and affordable financial products and services they can ensure their economic agency: a major factor to mitigate many of the risks our societies face including the challenges of climate change. The real potential of blockchain and post-blockchain technologies is financial inclusion.

Financial Inclusion

The World Bank has defined financial inclusion as having access to useful and affordable financial services. The financially included can securely save money, get reliable access to credit enabling them and their small businesses to expand, creating hope and jobs and a brighter future for entire communities.

For example, in Asia more than 1 billion people are forced to live without formal employment, a bank account, and with no meaningful ability to engage in commerce online or offline. Despite their abilities they lack access to critical resources to reach their productive potential. Globally approximately 1.7 billion people are unbanked. Not having the access that financial inclusion brings, these people also have no account for central institutions like the government to make transfer payments to, and for businesses to check the financial reliability of potential customers.

Almost everything that can be done by centralized financial institutions to assure inclusion can be done much more efficiently and cost-effectively by decentralized apps running on the new blockchain-inspired technologies — the Internet of Verification (IoV). The main services that enact financial inclusion such as transactions, payments, savings, credit, micro-finance, and even insurance, can be handled outside of the centralized financial infrastructure and more securely, which includes a private identity when they do not have the papers traditional institutions require.

Disclosure: I am one of the founders of LiQe Technologies which is building a suite of applications to satisfy all of the above mentioned needs that foster financial inclusion and inclusive growth. We have partnered with Holochain , building our apps on this novel highly scalable post-blockchain technology making computing much more efficiently than any blockchain technology in existence.

Informal Economy

The informal economy provides low-cost labour, inputs, goods, and services to both formal and informal enterprises; and low-cost goods and services to the general public. The term “informal” should not be conflated with “illegal” or “shadow” as the vast majority of informal workers or enterprises are the financially underprivileged who are trying to make a living. Working informally is most often not a matter of choice but of survival. The informal economy comprises 61% of the global labour force and more than 90% of Micro and Small Enterprises (MSEs) worldwide and is an important but hardly talked about engine of growth in developing countries.

The informal economy leaves a much smaller carbon footprint than its formal counterpart. For example: street vendors are more likely to source their goods locally, use far less packaging and generate less waste, reuse or recycle much more, and use little or no electricity. The informal sector can contribute greatly to inclusive growth if adequate investment mechanisms are supported and social and economic exclusion is ended. If, using positive language that is upbeat we build distributed applications for exchange, support self-organisation and design from the bottom-up, the informal economy can become an even more important engine of inclusive growth.

Secure Identity and Privacy

Personal data is the treasure trove of the major companies monetizing these data sets for huge gains. If given a choice most consumers would probably prefer to keep it all private, or at least participate in the profit these companies make. At LiQe Technologies we are making sure that every user is the sovereign of her or his data, ensuring that personal data expires by default or at a time set by the user. We have also chosen Holo for our partner because Holochain has built the security mechanism into its core code, making sure that a user’s personal data is stored independent of any app that may want to access data on their personal devices. This feature is called the Holo Vault.

This secure identity could be used as an identifying document in many other contexts as well, for instance, healthcare comes to mind as a crucial place where people want to remain the sovereign of their data. Moreover, the Holo Vault could over time also become an app that stores verified work experiences, education and titles, and so on, allowing everyone to safely store all crucial data as may be relevant to sensitive data-transfers. Finally, as soon as Secure Identities are recognized by websites there is no more need to change passwords, replace credit cards, and secure email addresses after a website or business has been hacked.

Transaction, payments — the transfers of monies

An estimated 258 million people are currently living outside their country of origin, many of which contribute to their families and communities in their country by sending money home. Remittances totaled $575 billion in 2016 with $429 billion going to developing countries, involving some 232 million migrants. Remittance prices are high. An example: David, a woman from the Philippines working in a household in Qatar earns $800 a month. She sends 80 percent of her paycheck back to the Philippines every month to support her two children: a 22-year-old son and an 18-year-old daughter. Sending $640 by a non-bank provider costs her $70 (=2,3 days of work). Son and daughter receive $570. With the Internet of Verification, and specifically LiQe token, she could send money for a much lower fee at around $0.10 or less.

The global average remittance price for Q2 in 2017 has been placed at 7.32% with banks remaining an expensive service provider with an average price of 11%, while other actors are even more expensive. Based on a community-based transfer process the cost of money transfers of all kinds; including paying bills, giving to charities, sending money to a friend or family member all can be lowered significantly because the other administrative costs incurred by intermediaries are virtually non-existent. Therefore, billions more would reach the families. When asked, many remittance payers say that they would prefer to use a cryptocurrency, where more than 80% repored in a recent survey of about 700 individuals. Yet, few have actually used cryptocurrency (about 16%) and among female respondents, 50% or more reported slight or no familiarity with cryptocurrency at all.

Savings

For financially underprivileged people, access to a safe place to save and build assets is as important as their access to loans. A digital wallet operating in the IoV can be stored anywhere, even on a piece of paper, and because creating a wallet can be pseudonymous and does not require an ID, this is a major step towards offering a functional savings account to the financially excluded and everyone else as well.

Savings are usually thought of as individual endeavors incentivized by an interest as long as the currency remains in the account. However, they can also be thought of as collective endeavors open to a much bigger range of incentives put into place by the collective itself. At LiQe we are working on comprehensive ways to leverage savings in several ways.

One innovation that we might be able to introduce is to make affordable smartphones available to the financially excluded so that they can build an e-commerce business. There are several ways to rise to this challenge: community owned smartphones, subsidized smartphones and intelligent solutions leveraging social entrepreneurship, philanthropy, and crowd-sourcing.

Credit, loaning and lending

A primary requirement for obtaining a credit or loan from financial institutions is a secure identity and access to a person’s financial history. I have mentioned how people can obtain a secure identity, but without a financial track record the only people that will give credits or loans are usually friends, family members, local vendors, or worse, loan-sharks.

Blockchain and post-blockchain technologies all have in common a transparent, generalized record or database. This database is either on a single world-wide ledger (Bitcoin) or on several hybrid ledgers (EOS, NEO etc.). With an agent-centric system that our partner Holo developed, transactions are safely locked in an indelible, auditable, transparent personal record. These unalterable records are potentially open to verification by a credit or loan providing person or institution. LiQe Technologies will use this mechanism to decide on credit limits by combining AI augmented algorithms with community managed trust-levels to provide credit sources that will charge low interest rates. This has only become possible because we use a post-blockchain technology that can handle a larger number of secure transfers than for instance the VISA infrastructure can.

Micro-finance

The cost of microfinance, for instance loaning $100 to pay for a medical bill, lies between 30% to 75% for the financially underprivileged. The most famous of microfinance providers, the Grameen Bank, provides loans costing between 8% and 20% — the lower the sum loaned the higher the percentage. Using a mechanism that doesn’t require an intermediary as I’ve sketched above, the costs can be low for all loans regardless of the size of the loan. But what about even smaller amounts that one could use to give someone a tip: 1 cent, 10 cents, 1 dollar? Up until now the costs of such transfers was prohibitive regardless of how attractive it would be for people who could make a living producing online content like blogs, information, pictures, songs. LiQe is currently creating a viable solution for this purpose.

The future of insurances

The Internet of Verification will in all likelihood also disrupt the insurance industry as we know it. Inclusive insurance is a late-comer in the thinking about financial inclusion and inclusive growth. At present the system is being thought about in regulatory terms. The industry itself is mostly interested in lowering the rate of fraud and risk. Using good applications on the IoV the fraud detection can be much higher; and where smart contracts can be used will probably approach 100%.

Overall, the improvements the IoV will bring to insurance is already immense because it greatly improves the flow of verified information and augments the interoperability of systems. Through verification the IoV also increases the reliability of transfers. Once the first applications that reliably create “mutual insurances” of all kinds enter the market, the insurance industry will be disrupted. At that point, we will have reached a phase where the financially excluded can include something like health insurance into the their growing economic participation.

Conclusion

LiQe Technologies is aiming to become a major player in the field of inclusive growth and financial inclusion. The first applications will incorporate a LiQe Secure Identity with easy and safe financial transfers. As we expand we will offer context-sensitive solutions for individuals, families, and communities geared to grow their wealth in sustainable ways. Using the UN Sustainable Development Goals as a guideline we will create solutions that support community engagement, and social and financial participation. By working on alliances with local and global partners that have expertise in the relevant fields, we hope to make credit and loans available for the financially underprivileged, and eventually venture into the field of mutual insurance.

If you are an investor and want to participate, or if you are interested in other support for LiQe Technologies and Foundation, please contact us at info@liqe.io