Blockchain Technology: Solving Challenges in Developing Countries.
Most simply, a blockchain is an inexpensive and transparent way to record transactions. People who don’t know each other – and therefore may not trust each other – can securely exchange money without fear of fraud or theft. Major aid agencies, nonprofits and startup companies are working to extend blockchain systems across the developing world to help poor people around the world get easier access to banks for loans or to protect their savings.
Big Wall Street companies are using a complicated technology called blockchain to further increase the already lightning-fast speed of international finance. But it’s not just the upper crust of high finance who can benefit from this new technology.
How does a blockchain work?
A blockchain is a fancy word for a transaction-recording computer database that’s stored in lots of different places at once. The best-known example of blockchain technology is the electronic cryptocurrency called bitcoin, but the concept can be applied in lots of different ways.
One way to think about a blockchain is as a public bulletin board to which anyone can post a transaction record. Those posts have to be digitally signed in a particular way, and once posted, a record can never be changed or deleted. The data are stored on many different computers around the internet, and even around the world.
Together, these features – openness to writing and inspection, authentication through computerized cryptography and redundant storage – provide a mechanism for secure exchange of funds. They can even involve what are called “smart contracts,” transactions that happen only if certain conditions are met – such as a life insurance policy that sends money to the beneficiary only if a specific doctor submits a digitally signed death certificate to the blockchain.
Right now, these sorts of services are available – even in the developed world – only because nations have strong regulations protecting the money people deposit in banks, and clear laws about obeying the terms of formal contracts. In the developing world, these rules often don’t exist at all – so the services that depend on them don’t either, or are so expensive that most people can’t use them. For instance, to open a checking account in some parts of Africa, banks require enormous minimum deposits, sometimes more money than an average person earns in a year.
A blockchain system, though, inherently enforces rules about authentication and transaction security. That makes it safe and affordable for a person to store any amount of money securely and confidently. While that’s still in the future, blockchain-based systems are already helping people in the developing world in very real ways.
Sending money internationally
In 2016, emigrants working abroad sent an estimated US$442 billion to their families in their home countries. This global flow of cash is a significant factor in the financial well-being of families and societies in developing nations. But the process of sending money can be extremely expensive.
Using MoneyGram, for example, a worker in the U.S. with US$50 to send to Ghana might have to pay $10 in fees, meaning her family would receive only $40. In 2015, transaction costs and commission rates averaged 10.96 percent for remittances sent from banks and 6.36 percent for sending money through money transfer operators. Companies justify their costs by saying they reflect the price of providing reliable and convenient services.
By contrast, Hong Kong’s blockchain-enabled Bitspark has transaction costs so low it charges a flat HK$15 for remittances of less than HK$1,200(about $2 in U.S. currency for transactions less than $150) and 1 percent for larger amounts. Using the secure digital connections of a blockchain system lets the company bypass existing banking networks and traditional remittance systems.
Similar services helping people send money to the Philippines, Ghana, Zimbabwe, Uganda, Sierra Leone and Rwanda also charge a fraction of the current banking rates.
Insurance
Most people in the developing world lack health and life insurance, primarily because it’s so expensive compared to income. Some of that is because of high administrative costs: For every dollar of insurance premium collected, administrative costs amounted to $0.28 in Brazil, $0.54 in Costa Rica, $0.47 in Mexico and $1.80 in the Philippines. And many people who live on less than a dollar a day have neither the ability to afford any insurance, nor any company offering them services.
Smartphones are increasingly common in the developing world. Russell Watkins/UK Department for International Development, CC BY-SA
In India, for example, only 15 percent of the population has health insurance. Even those people pay higher relative premiums than in developed countries. As a result, people in South Asia pay a much greater share of their health care costs out of their own pockets than do people in high-income industrialized countries.
Because blockchain systems are online and involve verification of transactions, they can deter (and expose) fraud, dramatically cutting costs for insurers.
Consuelo is a blockchain-based microinsurance service backed by Mexican mobile payments company Saldo.mx. Customers can pay small amounts for health and life insurance, with claims verified electronically and paid quickly.
Helping small businesses
Blockchain systems can also help very small businesses, which are often short of cash and also find it expensive – if not impossible – to borrow money. For instance, after delivering medicine to hospitals, small drug retailers in China often wait up to 90 days to get paid. But to stay afloat, these companies need cash. They rely on intermediaries that pay immediately, but don’t pay in full. A $100 invoice to a hospital might be worth $90 right away – and the intermediary would collect the $100 when it was finally paid.
Banks aren’t willing to lend money in places where fraudulent invoices are common, or where manufacturers and their customers might have inconsistent and error-ridden records. A blockchain system reduces those concerns because these records must be authenticated before being added to the books, and because they can’t be changed.
Those Chinese pharmaceutical companies are getting help from Yijan, a blockchain that is a joint effort of IBM and Chinese supply management company Hejia. Electronics, auto manufacturing and clothing companies facing similar difficulties are the test markets for Chained Finance, a blockchain platform backed by financial services company Dianrong and FnConn, the Chinese subsidiary of Foxconn.
Humanitarian aid
Blockchain technology can also improve humanitarian assistance. Fraud, corruption, discrimination and mismanagement block some money intended to reduce poverty and improve education and health care from actually helping people.
A pilot project in Pakistan is using a blockchain system to help needy families get cash and food. Farman Ali/UN World Food Program
In early 2017 the U.N. World Food Program launched the first stage of what it calls “Building Block,” giving food and cash assistance to needy families in Pakistan’s Sindh province. An internet-connected smartphone authenticated and recorded payments from the U.N. agency to food vendors, ensuring the recipients got help, the merchants got paid and the agency didn’t lose track of its money.
The agency expects using a blockchain system will reduce its overhead costs from 3.5 percent to less than 1 percent. And it can speed aid to remote or disaster-struck areas, where ATMs may not exist or banks are not functioning normally. In urgent situations, blockchain currency can even take the place of scarce local cash, allowing aid organizations, residents and merchants to exchange money electronically.
Blockchains can even help individuals contribute to aid efforts overseas. Usizo is a South Africa-based blockchain platform that lets anyone help pay electricity bills for community schools. Donors can track how much electricity a school is using, calculate how much power their donation will buy and transfer the credit directly using bitcoin.
Future potential
In the future, blockchain-based projects can help people and governments in other ways, too. As many as 1.5 billion people – 20 percent of the world’s population – don’t have any documents that can verify their identity. That limits their ability to use banks, but also can bar their way when trying to access basic human rights like voting, getting health care, going to school and traveling.
Several companies are launching blockchain-powered digital identity programs that can help create and validate individuals’ identities. Using only an internet-connected smartphone, a person is photographed and recorded on video making particular facial expressions and speaking, reading an on-screen text. The data are recorded on a blockchain and can be accessed later by anyone who needs to check that person’s identity.
Without email, phones, passports or even birth certificates, a blockchain could be the only way many poor people have to prove who they are. That could really make their lives better and expand their opportunities.
Awesome, Very informative post about the utilization of blockchain
It is something that many people don't know about yet but will change the world once we hit mass adoption.
ikr ? Blockchain is the future !
Blockchain for sure is a revolutionary concept that would forever change the history of finance and accountability at large. However like every other thing that has an advantage, it also comes with its own flaws.
As far as there have to be "middlemen" that facilitate the process of the system, then it is a centralised system. Humans will always capitalize on every atom of control they exert over a process. The "middlemen" I'm referring to are the people that'll process the digital signing.
Take Bitcoin for example, obviously, not everyone is as Tech savy enough to carry out a digital signing process. Most people wouldn't even want to go through that stress; they just want to send btc!
So obviously, they have to pay someone to do it for them. Those guys become the middlemen! And they influence the system as they so desire. Btc transaction fees have seen a high skyrocket these last few months(not that I blame them anyways, we all just wanna make profit), but my point is, as far as there is a third party that stands in between the buyer and the seller, then there is a probability of exploitation.
Blockchain has paved the way for smart contracts and transactions, but we have to evolve. I wrote a post about IOTA's tangle technology which I feel is a great step of evolution from blockchain.
I can't say for sure, which coins will reign supreme in the ultimate future, I can say however that we now have a chance of getting our wealth and health out of the hands of greedy bankers. Thank goodness for blockchain.
@blockchainnation there are some great examples of blockchain being used for good in this article. I enjoyed it, although some headings would have made it a little easier to read. I'm going to follow you for more articles like this :)
Wow nice write-up. This is only the beginning I'm so excited to see what the future has in hold for Crypto. Just have to do something about BTC fees, they have gotten out off had lately and slow, that's why I use LTC or ETH.
This was a good read I will be following for more content
Thank You
I can't use BTC specifically anymore. I use LTC for transferring coin around.
This was the first thing that got in my mind while reading. BTC fees are way too high these days. I think I have read about fees as high as 40$.
But luckily there are many alternatives with fees of a fraction of a cent or even no fees at all.
yes that's why I send LTC then sell it for BTC. It costs a fraction to send LTC or ETH. But the new tax bill that got in place will probably put a stop to that. From my understanding you have to keep tracl and pay tax on every time you exchange.
Exactly, I use LTC every time!
the blog is very informative and contains so much information
There is way more going on than in this article! But it is a scratch of the surface at least!
Very nice information blog with good informations
Thank you for your appreciation!
Happy new year
May the rekindling love and the reverberation of new years blessings find you today, increase your Grace and open your door for more Exploit .
Happy New Year Beloved.
Wow! I did not know Blockchain had made this much impact already!! Thanks for sharing. Great post.
Blockchain is getting the power back into the hands of the people!
Wao que explicación tan completa, muchas gracias.
Muy bien, de nada.
Coming into mainstream, block chain has potential to trigger all inclusive growth for sure .
Blockchain will touch every part of our society soon. It has way more capabilities than just currencies and collectibles.
nice article for the start in 2018, thanks for sharing, happy new year
Happy new year brotha!
It's great to hear how blockchains are helping people in the poorest of countries. Most new inventions and initiatives pretty much enrich the more prosperous countries on the planet.
It really helps in areas where there aren't banks on every street corner! Makes a huge difference being able to store wealth in crypto.
I really hope that this technology can empower the whole world and not just the well off.
Nice post! Thanks for sharing this useful information on blockchain. In fact, it will be mostly important in rural areas where banks and other necessary infrastructures are lacking. I follow anf upvote you.
True that my man. A lot of people in the world can't just stroll up to bank of america or wellsfargo to withdraw or deposit cash. Decentralized wealth carriers are the way of the future, no need to trust banks or scam artists anymore, we hold our own wealth.
Fruitful article indeed ♦♦ Found it of interest when u remarked, "They can even involve what are called “smart contracts,” transactions that happen only if certain conditions are met – such as a life insurance policy that sends money to the beneficiary only if a specific doctor submits a digitally signed death certificate to the blockchain."
Not that I didn't know what a smart contract is -- but I hadn't thought of how #Blockchain could affect Life insurance/Receipt of Funds.
Yet the Tidbit I found to be most endearing is How donations can be made to a School in #AFRICA -- that is so radical, so cool !
Fascinating to think of how the BLOCKCHAIN will impact various industries (and Daily lives ) -- and identity verification will surely be vital.
Here's an Article from Techcrunch :