How Blockchain can help the poorest people on the planet
Before I talk about how Blockchain can help the poor people I would like to present some data about the condition of world poverty at the moment so that you can understand the value of Blockchain and also increase your knowledge about the world poverty at the same time.
Nearly half of the world population which is more than 3 billion people lives on less than $2.50 a day. Out of which 1.3 billion people live in extreme poverty on just $1.25 a day. So, you can now understand the situation of world poverty right now. World Bank aims to reduce the global poverty to 9% by 2020 and 3% by 2030. However, it doesn’t seem possible with the current situation of the poverty. According to the World Bank more than 2 billion people worldwide are unbanked. Also, according to a survey conducted by the World Bank in 2017 shows that 1.1 Billion people in the world do not have an ID to prove who they are.
But all these problems can be solved with the help of Blockchain which I will discuss one by one. But before that let me tell you about why poverty exists. Poverty is mainly caused by these three reasons:
2. Financial Exclusion
Now let me explain you one by one that how Blockchain can help to remove them gradually. Let’s start with the world largest problem corruption.
We all know that corruption is the root of many big problems in the world right now and we still do not have any solution of this problem. But it can be reduced to a certain level with the help of Blockchain. We can take the example of world food program which is an agency of United Nations. This agency distributes 6 Billion USD every year for food assistance for the people who are refugees or displaced for various reasons. First problem in front of them was they have to pay 4% commission to the banks to disburse the money and almost 30% was lost due to corruption and mismanagement. From last year World Food Program started paying with crypto currency in Jordan where most of the Syrian refugees currently live and became very successful to counter the corruption and also reduced the cost of transactions. This is only one example of how corruption can be reduced using crypto currency. We know that corruption is all over the place like the insurance industry and law industry etc. Most of this corruption can be reduced by using smart contracts. Smart contracts can remove the need of a middleman in various industries. For example, if you want your children to inherit your money when you are dead. We can write a smart contract for that and put your money into the smart contract because smart contract can also hold money. Then you check in once a year to the smart contract to tell the contract that you are still alive and if you don’t check in for two years your children will get your money. So, first of all there is no need of a lawyer to do this job and second there is no chance of any kind of corruption in this case. So, these are just a few examples of how we can reduce corruption and if corruption is reduced poverty will be reduced automatically.
Now let’s talk about financial exclusion. Financial exclusion can be defined as the unavailability of banking services to people with low income. According to a report almost 2 billion adults do not have a bank account globally. Which means that these people can not borrow money from banks and will always be dependent on loan sharks for their financial needs and these loan sharks always charge very high interest rates from their customers? Also, they are unable to send or make payments other than physical cash. Most of the migrated workers remain unbanked who needs to send money back home almost every month. The only option these workers have is to send money via cross-border remittances companies such as Western Union, Money Gram etc. and these companies charge 15% to 20% of the total amount for their services. But Blockchain payments are done within minutes with a very small transaction fee and don’t need a bank account.
There are many companies which are working hard to make the global payments easy and faster with the help of Blockchain. For example, Stellar Lumens is aiming to bank the unbanked people by providing a low-cost instant payment network. Users will only need a Smartphone, a Stellar Wallet and some cash to top up at any cash in point. Users can send money to any part of the planet with the help of this wallet and they can also spend money digitally where this wallet is accepted for the payments. It will help the users to create a financial record and get a credit score and may be in the near future they can also apply for a bank loan based on this credit score. So basically, Blockchain can help a lot to these unbanked people to get on board and take part in the global economy.
Now the last point is hyperinflation. Hyperinflation is a term to describe rapid, excessive, and out-of-control price increases in an economy. Hyperinflation is a very big problem with fiat currency. In order to realize the potential of this problem I would like to discuss some of the past incidents which came as a big disaster for many people.
1.Hungry, 1945-46: Hungry’s hyperinflation of 1945-46 was the most intense incident in the history. In order for prepare for World War 2 the country lost its monetary policy and the Hungarian pengo currency depreciated. The inflation rate was 13600, 000,000,000%. The prices of the goods became four times higher in just 24 hours. The currency notes of 1 million pengos and 1 billion Pengos were introduced in the country. But apart from that so many people suddenly lost everything they had. People who were living normal middle-class life became poor in few hours.
2.Zimbabwe, 2007-08: Zimbabwe’s inflation problems began in the early 1990s when government decided to redistribute land from white Zimbabwean landowners to black farmers led to drops in food production and the collapse of the banking sector. A roll of toilet paper cost 145,750 Zimbabwean dollars at that time. In the late 2000s, Zimbabweans began using foreign currencies instead of Zimbabwean dollars, and in 2009 the currency was abandoned completely. Zimbabwe still uses foreign currencies to this date and has no national currency.
My purpose to tell you about these incidents was to inform you about the risk involved with the fiat currencies as these currencies can lose their values at any point of time and can make us poor anytime. But this problem can be permanently solved if we use cryptocurrencies instead of fiat currencies. Cryptocurrencies are always capped with a certain amount. For example, the Bitcoin has a capping of 21 million which means that only 21 million bitcoins can be mined in total. Once miners have unlocked this many Bitcoins, the supply will essentially be tapped out until Bitcoin’s protocol is changed to allow for a larger supply. So, in the same way each and every cryptocurrency has a certain limit to which it can be mined. This quality of cryptocurrencies makes them very secure in terms of hyperinflation as they cannot be printed wildly by any government in the world.
So, in this way Blockchain can help so many poor people in the world and make this world a better place to live. There are so many other things which I wanted to discuss like fractional ownership which makes it possible to own a single tractor by 10 different farmers in a village. But it is going to be another long story that how is it possible with Blockchain. But before I finish, I would just like to mention the name of a few companies which are doing a great job for the poor people with the help of Blockchain. Companies like RightMesh, Humaniq and BanQu are doing a great job by providing their various kinds of services based on Blockchain to improve poor people’s life.