MUCH of the attention around blockchain and cryptocurrencies has been around the sensational rise and volatility of bitcoin. Bitcoin has made millionaires of early cryptocurrency investors and caused headlines as those who bought at the top of the market have seen the value of their investments swing wildly.
Recently, Singapore saw a gathering of businesses, business leaders and NGOs focused on more laudable objectives – meeting the 17 UN Sustainable Development Goals. Aimed at ending poverty, protecting the planet and ensuring peace and prosperity, the Sustainable Development Goals were introduced by the United Nations Global Compact in 2015 with a 15-year deadline.
By the UN’s own acknowledgement, progress has been slow and the clock is ticking. But the development goals and bitcoin may be intertwined.
Blockchain or distributed ledgers, the technology underpinning bitcoin, has the potential to significantly increase the rate of progress in achieving the development goals.
The first problem that blockchain can help with is identification. It seems quite simple but not being able to prove you are you is a significant development issue.
The World Bank estimates that 1.5 billion people, the majority of them in Asia and Africa, do not have the means to prove their identity. These individuals have become known as the bottom of the pyramid.
Not having ID excludes them from services we take for granted – access to credit and savings, educational opportunities, health and social welfare and the electoral process. Refugees and migrant labourers are particularly vulnerable. To open a bank account can require multiple items of verification and involve travelling significant distances.
As a decentralised ledger, blockchain can establish digital identities for an individual and make that verification available to others, securely. In fact, when confronted with an influx of refugees, Finland did exactly that using blockchain technology. Once identification is solved, many things we take for granted as basic human rights, are suddenly available.
PAYMENTS AND REMITTANCES
One of the most lauded applications of the blockchain has been its application in addressing the more than 2 billion people currently excluded from the financial system.
These are people who have no bank accounts, they cannot access credit because the financial services infrastructure does not recognise them, and the financial services they rely on the most, such as remittance in the case of migrant workers, are expensive.
On the latter point, the blockchain can create a payments rail that is significantly cheaper than the current options available. According to the World Bank, remittances to developing countries alone amounted to US$429 billion in 2016, greater than official development assistance (ODA) and at least 3 per cent of Gross Domestic Product for over 60 countries.
Yet, the existing remittance framework is extremely expensive and predates the Internet age. Migrant labourers pay fees that you would not dream of paying to your bank for transferring money. Some 7.5 per cent of each remittance transaction goes to fees.
For families receiving on average 60 per cent of their income from the few hundred dollars that each migrant sends home each month, a significant amount of money that they can ill afford is being paid in fees.
Blockchain-based systems can provide nearly instant, verifiable, transfers at a fraction of the cost. At the Asean finance ministers meeting in April, Mr Heng Swee Keat, Minister of Finance, stated the potential for blockchain very clearly when he said: “Distributed Ledger Technology presents us with many opportunities for cheap and secure transactions. This can promote financial inclusion for underserved and underbanked segments in Asean.”
In addition to financial services and payments, interesting work is being done in areas from trade finance to tracking the providence of raw materials and even diamonds to ensure that progress is being made towards a fairer, more sustainable, future. As we look towards the development goals for 2030, blockchain may be a useful tool in making the world a better place.