The “chains of transactions” are, by their very nature, horizontal. They are about the abolition of middlemen, about direct interpersonal interactions, in which even the guarantor is not some government, financial body or regulator, but the community itself and the technology on which it is built.
Money is social too.
Human civilization long ago understood the unprofitability and fundamental inconvenience of barter exchange – for instance, it was difficult to trade a buffalo hide for apples. Since then, universal specialised instruments for payment – in other words, money – have played a major role in financial interactions between people.
However, with the development of social and political institutions, control over the financial sphere was quickly concentrated in the hands of established power bases.
Many people were left on the outskirts of the financial world, and even left behind entirely by the economy.
Today, when non-cash payments (which are, in fact, interbank operations) are becoming increasingly widespread, a large section of the world population is denied access to the banking sector and still makes transactions with outdated and even out-of-use coins and bills. They still retain a symbolic power, but there is no real guarantee of their value, other than people’s trust in these tools and their habit for using them. However, the fiduciary nature of modern state currencies is a topic for another awkward conversation. For now though, we’re talking about those who, by the turn of fate, found themselves outside the global banking system: those who are called “the unbanked.”
In developing countries, for one reason or another, huge numbers of people are denied the opportunity to open a bank account, to access not only a credit card, but a debit card – and even if you have one, denied the opportunity to use it. In some places this is due to the distance from large cities, in other places it’s thanks to high entry thresholds, from a wide range of minimum deposit amounts to open an account, to high interest rates for people who could theoretically afford them.
Technological leaders like Sweden and Holland are moving away from ATMs and the withdrawal of cash, into the “grey zone”. However, in India, Latin America and Africa, until recently people could not make payments and transfers by any means other than cash, which not only imposed an immediate cost on consumers, but was, in some regions, fraught with danger due to the fact that they could be a victim of a robbery.
The situation only began to change recently, thanks to the emergence of mobile micropayment systems. It is interesting to note that this happened as a largely unpredicted consequence of attempts to introduce new services by local mobile operators. Tools which were originally intended as a means of microcrediting were picked up and reinterpreted by the local population, then turned into a mechanism for both secure everyday payments and remittances to relatives living far away.
The problem is that these systems remain centrally controlled and, are in fact, dependent on the will of the companies which own them, meaning that they can be dissolved at any time, for example, if they are deemed to no longer be profitable.
In addition, remember that people who are among the “unbanked” do not have access to many other areas, including social benefits, insurance and the use of legal services.
Therefore the release of blockchain-technologies to the unbanked market carries the possibility of ensuring not only access to a fully-fledged and secure financial life, but can also significantly improve the social climate in which millions of people live. The transition to blockchain communications can ease the choking weight of state corruption and reduce the need for legal confirmation of mutual agreements.
One of the blockchain enterprises which is addressing the problems of developing countries is our own Humaniq project.
We, its creators, start from the premise that a move away from using cash increases the security of not just trade, but of life itself in these countries. For example, fruit traders in the markets of the Somali capital Mogadishu eagerly switched to mobile payments, saying that “cash can be stolen, but the transactions can’t be.” Today, people in many countries continue to face common theft, which can be fought by shifting the withdrawal of money from the real world to a virtual one.
Another benefit of the transition to a blockchain economy is remote transactions. Whilst equal to traditional banking in terms of speed and quality, they, would not tie a user (who may have poor financial literacy) into unnecessary and potentially dangerous obligations.
Decentralisation, and therefore independence from external factors, also plays a very large role.
In order to find the best methods for the use of blockchain technology and, at the same time, to introduce the planners behind our project to the real problems of real people, Humaniq decided to organize an international competition for social enterprises aimed at developing countries.
At the end of the competition, representatives from the three best-performing projects were sent on an ethnographic expedition to Kenya.
Why did we choose Kenya? This country has long been a springboard for a number of long-term socio-economic experiments, among which is one of the broadest (but still tragically inadequate) coverage of mobile payments in Africa and experiments on the introduction of Basic Unconditional Income.
One of the participants in the expedition, which can be followed via our project’s facebook page (https://www.facebook.com/humaniqchallenge/), was Richard Beresford, who proposed the concept of secure, responsible microfinance. He was joined by a team developing a blockchain product for working with land registries and property rights, and a group of researchers who were developing a project based on micro-earnings for performing small tasks.
All of these topics are very relevant, both for the people of Africa and for other regions and social strata. There are many people, even in developed countries, who are on the margins of the economy and whose problems are not so far removed from those living in rural Kenya. That is why research on the potential of blockchain technologies for social change is a matter of universal scale, which is a truly global challenge for everyone who cares.
This article has been republished with permission from Modest Money.