Published on October 3rd, 2013 by
How Bitcoin Could Develop the Developing World
By Michael Magan
[caption id="attachment_1252" align="alignright" width="205"] Image credit: Flickr
Much of the media focus on our fledgling currency has been on its western markets. The discussion frequently revolves around the U.S. Market when the U.S. accounts for only 4.5% of the world's population and only about 2.1% of the estimated world GDP. Bitcoin- and cryptocurrency in general- is slated to draw the curtains on the biggest financial revolution the world has seen... and the main stage lies in the developing world.
In 2012 alone there were 29 countries that experienced greater than 10% inflation and 8 of those countries experienced over 20%
. These statistics can be misleading because there are many countries that have experienced hyper-inflation. Brazil, Argentina, Nicaragua, Peru, Yugoslavia, Zaire and Zimbabwe have experienced hyper-inflation
rates of over 1,000% or more a year during the past 40 years- Zimbabwe being the most recent. At its peak it took a little over 24 hours for the prices to double
Notwithstanding that, many of these countries have severe restrictions on financial mobility. Access to banks and other secure ways of storing money are limited. Corruption in the legal system is not only rampant but well-known and expected. Government control of the currency in many countries is not blessing but a curse... leaving many people with little to none of the recourse afforded to those in the "developed" world.
Bitcoin has the potential to help the developing world experience a much greater degree of financial security and freedom than they had ever experienced previously. Financial security and freedom world allow people to save and invest in their future, luxuries currently afforded to only a fraction of the world's population.
Bitcoin's payment network provides a secure and frictionless mechanism for international exchange of wealth. Bitcoin's cryptography creates- for anyone with minimal access to electronics- a theoretically unbreakable safe to store their accrued wealth. As a deflationary currency, Bitcoin encourages savings and will never suffer from over-eager government printing presses.
The Bitcoin revolution has so much more to offer to the bottom half of the worlds population than the top half. This is not to say that Bitcoin won't positively affect the U.S. Economy as well, but that it will be much more life-changing
for someone who lives in Argentina or Zimbabwe.
Bitcoin's derivative technologies can also have positive effects in creating durable virtual markets: markets that are impervious to government corruption and fraud-prone legal systems. Smart contracts that are self-enforcing, smart cryptographic receipts and titles could help enforce property rights that could not be done previously. All these things are made possible by Bitcoin and cryptography.
Many people are skeptical that digital currencies- reliant on the internet and computers- could permeate the "dark" continents of the world. This concern is fundamentally contrary
to the trends that we are actually seeing in the developing world. Not only is mobile phone growth faster in Africa
then it is in the rest of the world but 98% of Latin Americans have cell signal
. These trends will only grow as currency moves to the cloud and the benefits of having such connections grow.
If you are still unconvinced of the possibility of digital currencies in the developing world, look no further than the current popularity of mobile payment systems. M-pesa
is Kenya and Tanzania's premiere digital payment system and has been wildly successful; It is just a matter of time until users cut out the middle man and switch to cryptocurrency like Bitcoin, which is more secure, private, and free.
Bitcoin is a long way from revolutionizing finance, but tides are changing. Those with the most to gain are the world's poorest and most disenfranchised. Bitcoins may, for now, be the domain of the top 1% of world but it is a only matter of time until entrepreneurs will find ways to expose the world's poorest to the great benefits of Bitcoin.