Take a good hard look at this picture. A bank was robbed in Venezuela. The people burned the money to demonstrate it was worthless.
This is Venezuela. This is also Zimbabwe. Soon it’ll be South Africa and other countries in “the third world.” But don’t, for a second, believe that these countries are spiraling down the drain. No. They are rising. They are throwing off the chains of government oppression and boldly stepping forward to a bright future.
And their future will grow on the blockchain. In fact, they will adopt, adapt, and use cryptocurrencies and blockchain so fast that we, in the ‘developed’ world, might very well be overtaken and left behind. After all, all they need to use blockchain technology and cryptocurrencies is an internet connection. So here are 5 ways this could happen.
If you don’t know much about Blockchain technology and cryptocurrencies, read this introduction to blockchain.
1. Curbing Inflation Using Cryptocurrencies
Inflation is a basic side-effect of standard government printed money (Fiat). The more money is printed (increasing supply) the more it inflates. This is one of the reasons why the U.S. and Europe and other ‘first world’ countries also experience inflation. It’s unavoidable with centralized, government-backed currency.
But where developed countries have a ‘normal’ rate of inflation (between 3 and 6 percent), the third world has inflation from 200% to 20,000% and more. Why? Simple. The government, or rather the people running the government, think they can solve everyone’s problems by printing more money!
The Economist reports that in Venezuela people are using their own money to make souvenirs for tourists. They sell it as “money art.” It’s not because Venezuelans are so wealthy — but because their paper money is worth less than the paper it’s printed on! i.e., the materials are cheap.
“The handbags, purses, and hats they sell are made from nearly new Venezuelan banknotes and sold as mementos. The raw material— banknotes —are still legal tender in Venezuela. But inflation is so high they are worth more folded up into origami objects than as cash.”
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Cryptocurrencies to the rescue
Most cryptocurrencies, especially the big old boys like Bitcoin and Litecoin, are deflationary. Suffice it to say: deflationary means that these cryptocurrencies have a fixed final supply and that the quantity created is slowly and surely reduced. This naturally means that their value stays steady with steady demand and even has the potential to increase if demand increases.
For Venezuelans, as soon as they learn this, the light bulb clicks. They turn to crypto. They use it. Even though Bitcoin and cryptocurrencies were once illegal — they risked jail to buy and use them. This ‘light bulb’ moment will stay with them. Long past their revolution, past any new government and new national fiat Bolivar — they will continue to use and trust cryptocurrencies to hold their value.
2. Banking the Unbanked
Hundreds of millions of individuals in developing countries do not have access to basic banking services. They transact only in cash. On the one hand, this prevents them from going into debt — but on the other hand, this also prevents them from incredibly useful banking services: car loans, home loans, business loans, savings accounts, debit and credit cards, and more.
Basic financial services give people financial freedom. They allow people to take part in the global economy and begin making their way out of poverty. People can take loans to start businesses. They can take credit and buy local goods — boosting the local economy. Most importantly, they can store their hard earned money is savings accounts and avoid being mugged for it — or the temptation to mug someone for it and then be burned alive by a mob.
Cryptocurrencies to the rescue
Cryptocurrencies offer a way for people in the developing world to leapfrog traditional banking. Locals can keep their hard earned money on digital wallets — which are far safer than cash wallets. They can use crypto loan services to finance business endeavors or other services. The possibilities are open and increasing in scope.
3. Tackling Corruption and Voting with Transparent Transactions
Governments in developing countries tend to be corrupt. They are run by people. And people, given power, tend towards corruption. These people in power use public funds for their own personal gain rather than helping their citizens who are struggling. The people don’t know this. They feel it — when the police turn a blind eye or the president buys a new yacht, etc — but they can’t directly see how their tax dollars are being misused.
Worse still is when people have their basic rights corrupted, such as their right to vote. The UK news source Express reported police finding a car full of forged ballot papers in Turkey. When citizens see this, they feel powerless, useless, and unable to affect change.
Blockchain to the rescue
The blockchain is a public ledger. Anyone can check and verify it. As developing countries demand transparency — through protests and overthrowing of governments — they will turn to blockchain technology. It’s already happening.
A report from the Bangkok Post surfaced. It showcased Thailand’s National Electronics and Computer Technology Center (NECTEC) — which is a unit of the Ministry of Science and Technology. The report covered how the NECTEC completed the development of a system for blockchain-based voting. The unit is currently searching for trial partners.
Chalee Vorakulpipat, head of the cybersecurity laboratory at NECTEC, wrote in the report a few fascinating and key statements:
“Nectec developed blockchain technology for e-voting that can be applied to national, provincial or community elections, as well as business votes such as the board of directors. The goal is to reduce fraud and maintain data integrity.”
This is a big step forward for Thailand — a country that was ruled by a monarchy with an iron fist for almost its entire existence. Such voting systems on a blockchain will blaze past our traditional paper ballots. Perhaps this will set an example for developed countries.
4. Reducing Remittance Costs Through Instant and Affordable Global Payments
Countries will often charge large fees for remittances that are sent in order to profit and those who are sending the money to their families, as well as the families themselves, will often suffer as a result.
Cryptocurrencies to the rescue
Forbes recently reported about remittance costs. They pointed to Stellar Lumens, noting that this cryptocurrency can pass “through borders at fractions of a cent.” In one case it was noted that Litecoin could process $99 million in value (of LTC) at a $0.40 transaction fee. Such speed and low cost would be of huge help to people in developing countries where even small amounts of money go a long way.
Another fantastic example is the Philippines. Coins.ph, for example, leverages the blockchain to help more than a million users. And another company called Toast uses blockchain technology without end users even knowing — thus saving their users upwards of 86% versus traditional banking services in the country.
5. Encouraging Entrepreneurship in Developing Countries
The surest path to prosperity is innovation. New patents, new products, new solutions to local and global problems. But world-leading companies such as Apple, Microsoft, Paypal, eBay, and more did not begin as projects of big government or big business. They began in garages and home offices. People lead innovation. Developing countries such as India and Venezuela are full of people. Their governments, however, are stifling them.
Blockchain to the rescue
Entrepreneurs across the developing world are seeing opportunities and filling them. BitPesa, for instance, launched in 2014 across Kenya, Nigeria, Tanzania, and Uganda. It helped people convert their virtual money into the local currency while using it across their mobile accounts. In their first several years, BitPesa enabled over 6,000 people to make cross-border payments, run their businesses, and generally get a great headstart in their entrepreneurial endeavors.
Or take Latin America as another great example. Ripio, a financial payments company, was established by local entrepreneurs and enabled locals to process international transactions with bitcoins or credit cards. Their customers had the freedom to buy bitcoins instantly in Brazil, Argentina, Ecuador and Chile — and more countries were coming online each month.
The third world and crypto — jumping past us.
The third world already seems ready to use crypto and blockchain to jump past our developed world. They already did so with telephone communication. Some countries, such as Kenya and Ethiopia, never had traditional payphones and landlines in every home. Instead, a vast majority of its citizens simply bypassed landlines for cheap cell phones. The same case could happen with cryptocurrencies vs. traditional banking. Rather than wait for big banks — locals could begin to use cryptocurrencies, using their cellphones and computers as their banking systems — and thus develop blockchain solutions before we ever do. As Richard Branson — CEO of Virgin — commented: blockchain in the third world can produce an “economic revolution.”
Rafael H. is a speaker and writer. He’s well known for his trip around the world (18 countries) on one single Bitcoin. Nowadays, he supports the expansion of the cryptosphere by helping and coaching newcomers.