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Blockchain

How Blockchain Technology Is Being Used To Eradicate Poverty In Developing Countries

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Blockchain technology is being used by big Wall Street firms to increase their reach. But this technology is not only for the elite of high finance.

A blockchain simply records transactions in a transparent and inexpensive way. It allows people who do not know each other, and may not trust one another, to securely exchange money without worrying about fraud or theft.

Major aid agencies, non-profits, and startups are working together to expand blockchain systems throughout the developing world in order to assist poor people around the globe with loans or saving.

As a scholar of technology and business, I focus on the impact of Blockchain and other technologies like bigdata and Internet of Things. There are four main ways that blockchain systems can connect the poorest people in the world to the global economy.

What Is A Blockchain?

A blockchain is a fancy word for a transaction-recording computer database that’s stored in lots of different places at once. Blockchain technology has been most well-known as the digital cryptocurrency bitcoin. However, the concept can be used in many different ways.

A blockchain can be viewed as a public bulletin board where anyone can post transaction records. These posts must be digitally signed in a specific way. Once posted, records cannot be modified or deleted. These data can be stored on many computers across the internet and around the globe.

These features, which include openness to inspection and writing, redundant storage, and authentication via computerized cryptography, provide a secure mechanism for the exchange of funds.

These transactions can also include “smart contracts” which are transactions that occur only when certain conditions are met.

For example, a life insurance policy sends money to the beneficiary if a particular doctor submits a digitally signed certificate of death to the blockchain.

These services are currently available in developed countries, even though they don’t exist yet. This is because there are strong regulations in place to protect the money that people deposit in banks and clear laws regarding the terms of formal contracts.

These rules are often not in place in the developing world. The services that depend on them either don’t exist or are too expensive to be used. To open a checking account, banks in certain parts of Africa require huge minimum deposits. Sometimes, this is more than a person makes in a year.

Blockchain systems, however, are able to enforce rules regarding authentication and transaction security. This makes it easy and affordable to store any amount of money safely and securely.

Although blockchain-based systems may not be possible in the future but they are already helping people in developing countries in real ways.

International Money Transfer

Emigrants who worked abroad in 2016 sent an estimated US$442 trillion to their family members back home. This global cash flow is an important factor in the financial well being families and societies in developing countries. However, sending money can be very expensive.

MoneyGram allows workers in the U.S. to send US$50 to Ghana. However, they might need to pay $10 in fees. This would mean that her family would only receive $40.

In 2015, transaction costs and commission rates were 10.96% for money transfers sent from banks, and 6.36 percent to money transfer operators. The cost of providing reliable, convenient services is what companies use to justify their costs.

Hong Kong’s Bitspark, which is blockchain-enabled, charges a flat HK$15 to remit HK$1,200 (about 2 USD for transactions under $150) and 1 percent for larger amounts.

The company can bypass traditional remittance networks and banking networks by using secure digital connections through a blockchain system.

Similar services that allow people to send money to the Philippines, Ghana, Zimbabwe and Uganda are also available at a fraction of current banking rates.

Insurance

Because it is so costly compared to income, most people in developing countries lack life and health insurance. High administrative costs are a reason for this: Each dollar of insurance premium collected incurred administrative costs of $0.28 in Brazil; $0.54 in Costa Rica; $0.47 in Mexico; and $1.80 (Phoenix). Many people living on less than $1 a day are unable to afford insurance or any company that offers services.

In India, only 15% of the population has health insurance. Even people pay more relative premiums to developed countries than they do .

People in South Asia are able to pay a greater share of their healthcare costs from their own pockets than people living in high-income countries.

Blockchain systems, which are online and verify transactions, can prevent (and expose) fraud, drastically reducing costs for insurers.

Consuelo, a microinsurance service that is blockchain-based, is supported by Saldo.mx, a Mexican mobile payments company.

Customers can pay very small amounts to get life and health insurance. Claims are electronically verified and quickly paid.

Small Businesses Can Also Benefit From Blockchain Systems

Small businesses can also benefit from blockchain systems. They are often in short supply of funds and find it difficult, if not impossible, to borrow money.

For example, small Chinese drug retailers often wait up to 90 day to be paid after they have delivered medicine to hospitals. These companies require cash to survive.

These companies rely on intermediaries who pay them immediately but not in full. A $100 invoice sent to a hospital could be worth $90 immediately – the intermediary would then collect $100 once it was paid.

The banks won’t lend money to customers or manufacturers who have inconsistent or error-ridden records. These concerns are reduced by the blockchain system. The records must be authenticated before they are added to the books and cannot be changed.

Those Chinese pharmaceutical companies are receiving help from Yijan, which is a blockchain created jointly by IBM and Chinese supply management firm Hejia.

The test markets of Chained Finance are for electronics, clothing, and auto manufacturing companies that face similar problems.

This blockchain platform is backed by Dianrong, a financial services company, and FnConn (the Chinese subsidiary Foxconn).

Humanitarian Aid

Blockchain technology can also be used to improve humanitarian aid. Fraud and corruption, discrimination, and mismanagement all block money that could be used to alleviate poverty and improve education and healthcare.

The U.N. World Food Program began the first phase of its ” Block” initiative, which provided food and cash assistance to families in Pakistan’s Sindh region.

A smartphone connected to the internet authenticated and recorded payments made by the U.N. agency. This ensured that the beneficiaries received help, the merchants were paid, and that the agency did not lose its money.

It expects that using a blockchain system to reduce its overhead costs will be less than 1%. It can speed up aid to remote areas where banks or ATMs are unavailable or not working normally.

Blockchain currency can be used to replace local cash in emergency situations. It allows residents, merchants, and aid organizations to exchange money electronically.

Blockchains can be used to help people contribute to international aid efforts. The South African blockchain platform Usizo allows anyone to pay for electricity bills for community schools.

Donors can track the electricity used by a school, calculate the power they will purchase, and then transfer the credit to their account with bitcoin.

Future Potential

Blockchain-based projects will be able to help governments and individuals in many other ways. 1.5 billion people, or 20 percent of the global population, don’t have documents to prove their identity.

This not only limits their access to banks but can also prevent them from accessing basic human rights such as voting, health care, and travel.

Many companies have launched digital identity programs using blockchain technology. These programs can be used to create and verify individuals’ identities.

A smartphone connected to the internet can be used to capture a person’s facial expressions, speaking, and reading text. Anyone can access the data later on by accessing a blockchain.

A blockchain is the only way for many people living in poverty to prove their identity without email, phone, passports, or birth certificates. This could make their lives easier and increase their chances.

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