When most people hear the word ‘blockchain,’ they probably instantly think of cryptocurrencies, mainly bitcoin. Although blockchain technology was first developed for this cryptocurrency, today, it could play a vital role in addressing challenges faced by infrastructure-poor economies.
What is Blockchain?
Blockchain technology is a decentralized ledger system for recording and storing information in a secure, mostly anonymous way, primarily used for keeping a record of financial transactions. The difference between a blockchain system and a typical database is in the way it stores data. The information in a blockchain is stored in such a way that it makes it impossible to change, hack or cheat the system. Every ‘block’ in a blockchain holds a record of transactions in a decentralized ledger. Taken together, these blocks create a ‘chain’ in a peer-to-peer network.
Blockchain could be easily used in the financial and banking sector as a payments system, where cryptocurrencies would replace traditional monetary units. With only a steady internet connection, people worldwide would be able to make their transactions instantly and securely, resulting in an economy grounded in a peer-to-peer system of exchange.
Although blockchain has numerous applications in multiple sectors, it’s the banking industry and financial services that it’s most disrupting. Since blockchain circumvents the need for a mediator to process and verify financial transactions as correct and valid, it can mitigate the costs used to make and receive payments. Additionally, data stored as part of a blockchain is tamper-resistant, which reduces the potential for corruption. Blockchain technology also makes banking services more accessible since banks operate only at certain hours of the day while blockchain is available 24/7.
However, despite its various applications, does blockchain really have the power to solve economic problems on a global scale? Let’s find out.
What Problems Can Blockchain Address?
Here are six major economic problems that blockchain can address:
1. The Progress of Underdeveloped Nations
Despite the digital revolution and growth that first-world countries experienced over the past couple of decades, rules and regulations regarding pollution mixed with infrastructure challenges put underdeveloped countries at a severe disadvantage. Many underdeveloped countries don’t have the internet, robust banking, or electronic systems needed to benefit from the global digital transformation.
However, by adopting blockchain technology and cryptocurrency, such nations could take advantage of new technologies to bypass traditional infrastructure development stages and close their gaps. In countries with underdeveloped financial systems, cryptocurrencies could be highly beneficial, as they remove the need for large investments in banking infrastructure.
2. International Trade and Regulation
When adopted and properly used, the blockchain system and cryptocurrency can increase the speed and convenience of global transactions while cutting costs, leveling the playing field between those who can afford financial services and those who can’t. Blockchain offers financial inclusion for traders from underdeveloped countries, allowing them to participate fully in the global economy by providing a safe and affordable solution to international transactions.
On a global scale, blockchain technology also drives better communication and collaboration throughout the financial industry and banking sector and substantially improves supply chain management. Because of lack of transparency, supply chain management tends to have problems and challenges like service redundancy, lack of reliability, and lack of coordination between departments. Tracking products can be done with blockchain technology by enabling traceability across the entire supply chain.
3. Real Estate and Property Rights
Property rights and real estate can be difficult to track in developing countries – information may not be backed up, transactions can be done with a handshake, or documents may get stolen or lost. That is why transparency and accountability are the two biggest concerns in this sector.
Blockchain offers a valuable tool for determining ownership and keeping unsupported property records in place. This way, blockchain technology replaces the middleman, lowers fees, and verifies information in real estate transactions. NFT (a non-fungible token) on a blockchain can contain the complete history of a property and any other information municipalities and governments would typically keep on record.
4. Proof of Identity for Refugees
Blockchain can offer a groundbreaking solution for keeping personal identification and information secure, and as such, this technology can create new solutions for refugee identification. Refugees, unfortunately, are often forced to leave their countries without taking any kind of formal identification with them. Just in 2020, according to the UNHCR, around 82.4 million people were forcibly displaced worldwide.
Without identification, these people can’t open a bank account, obtain a loan, or vote. They can have difficulties in obtaining healthcare and have numerous problems in getting other legal documents. The United Nations aims to ensure everyone has a legal identity by 2030, and blockchain technology can play a vital part in facilitating this process.
5. Security of Personal Data
One of the biggest negatives of digital transformation has been the huge increase in personal data theft. Government databases are mostly the target of cyberattackers. Database cyberattacks have so far exposed the names, birthdays, social security numbers, addresses, and driver’s license numbers of millions of people. Blockchain strengthens network security by reducing single-point-of-failure risk, making a database breach almost impossible. Aside from this, blockchain technology can, in specific applications, reduce government redundancy, decrease audit burden, streamline processes, increase security and ensure data integrity.
In the healthcare system, patients have the ability to connect to other hospitals and collect their medical data. However, they can face numerous delays and risk data corruption since data is stored in a physical memory system. Blockchain, however, removes a central authority and allows instant access to information. Every block is linked to another one and distributed across the computer node, making it difficult for cyber attackers to corrupt the data.
The world is actively changing, and it’s changing fast. It faces a growing need to tear down the borders in search of total financial and social inclusion, and blockchain technology has all it needs to address these issues. It will only be a matter of time until this technology finds its way into our lives, shaping them for the better, with inclusion and economic growth in mind.
Keep Reading on the series about Blockchain, Crypto, NFTs and Web 3.0. NFTs for Good.
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