Many people often erroneously mistake Blockchain for cryptocurrencies – the error is understandable, given that the idea of Blockchain came to the limelight after the launch of Bitcoin.
Fundamentally, Blockchain technology is a base layer operating system on which developers can build all kinds of decentralized products and services. Cryptocurrency is only one of the many possible applications of Blockchain technology.
Blockchain technology is a disruptive force that could power incredible paradigm shifts across industries, economies, and governance. The rise of Bitcoin over the last 10 years, the birth of the cryptocurrency industry, and the conversations about the role of decentralized currencies in the global economy attest to the disruptive potential of Blockchain.
The developed West already operates at a highly functional level across socio-political and economic metrics. Hence, there are debates on the value proposition of Blockchain in optimizing systems that already work.
However, the developing countries of Africa and Asia are lagging in developmental growth because of deep centralization that fosters systemic inefficiencies. This piece examines four potential use cases of Blockchain technology to facilitate developmental growth in emerging economies.
Energy, starting with electricity is one of the key drivers of economic growth but much of the developing world is entirely off-grid or connected to an unreliable grid network. For people living on less than $2 per day, the main source of illumination is often fossil-powered power generators that are expensive to maintain, injurious to their health, and harmful to the environment.
Interestingly, green energy from renewable sources is a viable solution for providing energy access in developing economies sustainably. Unfortunately, renewable energy often requires huge initial investments to roll out at scale and the investment outlay often requires patient long-term capital.
Blockchain technology can be used to crowdfund investments into green energy assets through the sale of energy tokens. Through the instrumentality of smart contracts, green energy investors can pledge funds towards the deployment of green energy assets in target markets and they can be assured capital reclamation and ROI once the asset is live and users start paying for energy credits.
Many developing economies are unable to garner the critical momentum needed to lift a large bulk of their population out of poverty because of infrastructure deficiencies. Lack of good road networks, reliable mass transit, dependable healthcare, social security, and substandard education are some of the biggest infrastructural challenges facing developing countries.
Many governments in developing countries have budget deficits that prevent them from carrying out capital intensive infrastructural development programs. Unfortunately, international financial institutions and donor agencies are wary of giving out development loans because there’s the risk of misappropriation of funds.
Blockchain technology could be used to power sovereign loans or bonds to assuage the fears of investors about the right usage of the funds. For instance, smart contracts might be enabled to ensure that the funds can only the transferred to verified contractors as payment for work on preapproved infrastructural projects. The use of Blockchain in supply chain management could also be valuable to monitor the progress of the infrastructural projects as the funds are released in tranches.
One of the root causes of underdevelopment in some African and Asian countries is a fundamentally flawed electoral process that produces corrupt, inefficient, and ineffective leadership. Unfortunately, it might be difficult to unlock sustainable development at scale until there’s a holistic overhaul of the process that produces the leadership of the country.
Blockchain technology is currently being explored as a solution to power a transparent and provably fair electoral process through projects such as Agora and FollowMyVote.
The decentralized nature of Blockchain technology ensures that there’s no centralized point through which elections could be rigged. More so, the election results can be collated independently in real-time to enable people to choose their leaders without being coerced through the state security apparatus.
The challenge, however, is that Blockchain is purely digital and it might be hard to deploy it in rural areas where digital telephony hasn’t penetrated. More so, there’ll be the need to invest lots of time and resources into electoral education to reduce disenfranchisement.
Development growth can’t be realistically sustained until a large bulk of the population is lifted out of poverty to kickstart a cycle of upward mobility. Financial inclusion makes it easy to bring in the financial and economic activities of people in informal sectors into the formal financial sector.
Hence, people who ordinarily won’t think about opening a bank account are empowered to have bank accounts. In addition to banking, financial inclusion allows people to build up credit histories and to access financial services such as insurance, mortgages, and investment opportunities.
Unfortunately, traditional financial institutions do not have the incentive or motivation to drive financial inclusion due to the limitations of the current business models. The cost-benefit analysis of financial inclusion using the current technology stack of traditional financial institutions doesn’t make economic sense.
Thankfully, Blockchain technology through services such as RippleNet could potentially drive financial inclusion by powering a fast, seamless, and cheap transfer of value. It would also be interesting, some other financial inclusion solutions are being built on Bitcoin, Ethereum, Stellar, and EOS among others.
Blockchain technology can be a powerful agent of change in facilitating development growth at scale. If regulators look beyond the speculative nature of cryptocurrencies, they’ll see huge opportunities to leverage Blockchain in ensuring that the right people are voted into governance, engendering transparency in government expenditure, making it easier to hold governments accountable, and making it easier for financial institutions to extend the reach of their operations.