Will the blockchain create a poverty revolution?

As recently as March 2nd, the cost of a single bitcoin was over 10,000USD.

Bitcoin is a digital currency that sits atop the block chain. The most important thing you need to know about the block chain is that it can contain a public and decentralized ledger.* This ledger allows transactions to be validated by a public and decentralized group. With a public ledger, block chain is a game changer for industries traditionally plagued by middle men and lack of transparency.

As I write this, I am in the airport of Siem Reap, Cambodia. I can’t help but visualize what digital currency and the blockchain would look like in Cambodia.

Cambodia’s history illustrates the formidable power of humanity, both the horrific and magnificent. The magnificent is palpable at Angkor, a temple city built during the Khmer Empire in the 12th century. At it’s peak, Angkor Wat was a megacity and estimated home to over 1 million people when the population of London was a meager 15,000. As a UNESCO World Heritage Site, Angkor stretches over 400 km2 and is comprised of awe inspiring temples such as Angkor Wat and Ta Phrom. The ancient city boasted royal residences, treasuries and aqueduct systems exemplifying the prosperity and complexity of Khmer society at the height of its empire.

Angkor Wat (above) is the largest religious monument in the world. (1)

However, Cambodia’s modern history is harrowing and marred with genocide, inefficacy of international aid and corruption. Most notably:

• In 1975, the Khmer Rouge, led by Pol Pot, seized power and sought to return Cambodia to an agrarian socialist society. Part of this return to agrarian life included the cleansing of anyone who was: educated, artists or wealthy. During its rule from 1975 date to 1979 date, the Khmer Rouge murdered a quarter of the population, an estimated 1.7 to 2 million people. (2).
• In 1992, the United Nations Transitional Authority in Cambodia (UNTAC) began. With the goal of creating a democratic state, the UN and foreign donors poured millions of dollars into Cambodia. From 1992–1993 UNTAC cost over 1.5 billion USD and operated with 22,000 personnel. (3)
• From the 1990s to 2010, the international community gave over 18 billion USD of aid to the Cambodian government (4). Instead of creating a modern, developed, and democratic state, international aid contributed to widespread corruption and scant economic growth. In 2016, annual GDP per capita is in Cambodia was a mere 1,269.91 USD, about half of neighboring countries Lao and Vietnam (5). Furthermore, Cambodia is the most corrupt country in South East Asia, ranking 156 out of 176 countries by Transparency International (6).

Cambodia is not unique. In 2016, the global community spent 142.6 billion in development assistance to the world’s poorest countries (8). Over the next 20 years, the cost to end global poverty has been estimated at $175 billion (7) — which is a rough 8.7 billion annually. Which begs the question how effective is international aid?

International Aid Needs Transparency

What would happen if the over 18billion USD given to Cambodia was distributed through a more transparent and accountable financial method? Aid distribution through the blockchain could help eliminate the 2 trillion USD (9) annually spent on corruption worldwide and use the 142.6 billion USD spent on global development more efficiency and effectively. With an inherently transparent model of a public ledger, where anyone can validate a transaction and a publicly available digital history, could the blockchain bring to light the countless side deals and money pocketed by government officials in many developing countries, including Cambodia?

Public Ledgers and Transparency

Another benefit of block chain and a public ledger is it is inherently transparent.

As this great overview explains: “Bitcoin is politically decentralized — no single entity runs bitcoin — but centralized from a data standpoint — all participants (nodes) agree on the state of the ledger and its rules. A bitcoin or a transaction can’t be changed, erased, copied, or forged — everybody would know.”

Although Bitcoin’s ledger can be anonymous and is often referred to as cryptocurrency, Ethereum, bitcoin’s main competitor uses smart contracts, which allow any transaction to be logged back to a secure id and single source of truth. This idea could be scaled to include social security or other methods. While this technology is far from perfect, the concept could have major implications for corruption. So long as a currency’s ledger is public and the transaction is linked to a transparent secure id, the blockchain has potential to increase and ensure financial transparency.

The Blockchain is Inherently Democratic

By mandating accountability by design, the transparency of bitcoin and the blockchain could have profound impacts for global financial systems. What if we could instill democratic values from a grassroots level? Rather than a top down institutional approach such as the UN mandated elections in 1992, what if we instill them through meeting a basic societal need — money?

Technology is inherently democratic so long as all parties are created equal and the connection between those parties remains unhinged. For example, anyone can create a Facebook profile and friend someone else.**** As the democratic nature of video and social media was a major catalyst for the Arab Spring (such as the 2011 Facebook Revolutions in Egypt and Tunisia), so too bitcoin may be a revolutionary catalyst for aid transparency and anti-corruption.

Technology is a force multiplier for impact.
If adopted, digital currency and the blockchain technologies have the potential to create profound effects for the world’s poor and disadvantaged.

Bitcoin can facilitate economic integration of the global poor, such as the roughly 2.5 billion adults who don’t have bank accounts. Foreign workers remit $500 billion home annually, and Bitcoin could eliminate the fees of 10 percent or more paid to middlemen.

Widespread distribution of international aid through the blockchain could create a poverty revolution to hold the millions of dollars spent in international aid accountable to those it was intended for — the poor in developing countries.

In summary, bitcoin and the block chain could be as much a political and economic experiment as it is a technological one. If applied to the billions of dollars spent on international development, digital currency and the blockchain have the potential to create widespread transparency and accountability — two desperately needed characteristics for the international aid community.

Appendix

• * For more on the block chain, see here and more on bitcoin see here.
• **The Cambodian genocide, unique from other Genocides such as the holocaust or Rwandan genocide where one group was ‘cleansing’ another, created a new term by scholars termed auto genocide. Auto-genocide refers to the killing of a population by its own people. In Cambodia this refers to the Khmer Rouge’s murder of the educated and wealthy class of which Pol Pot, educated in France and from an elite family, was certainly a member.
• *** UNTAC’s aim was to restore peace and civil government in a country ruined by decades of civil war and Cold War machinations, to hold free and fair elections leading to a new constitution and to “kick-start” the rehabilitation of the country. See more here.
• ****To a certain extent this is true. Advertising, security controls and the current debate on hate speech all muddle the reality of equal parties and connection.

Sources:

1. Guiness Book of World Records
2. United to End Genocide, Cambodian Genocide.
3. Findlay, Trevor. Cambodia Legacy and Lessons of UNTAC, 1995.
4. Brinkley, Joe. Cambodia’s Curse pg: #
5. GDP per capita Citation
6. See Transparency International Cambodia.
7. Sachs, Jeffrey. The Cost to End Poverty, 2016.
8. OECD, Development aid rises again in 2016 but flows to poorest countries dip. 2017
9. Thomson, Stephanie. WEF, We Waste 2 Trillion a Year on Corruption, 2017.

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