Poverty /ˈpɒvəti/: the state of being extremely poor
Over the past 100 years, the world has seen an extraordinary growth in welfare. Across the board, the world today is in a much better state, economically, than it was 100 years ago. Although it may seem that the world is on fire at the moment, with ongoing wars in Syria, the Yemeni crisis, or the terrorist threat from ISIS that killed thousands of people and left millions fleeing their country, or the Mexican Drug war that has killed over 80,000 people since 2006 [142], nothing can be further from the truth. On almost all levels, life on earth has improved in the past 100 years from our life expectancy, the number of people living in democratic countries, to the number of people living in extreme poverty. Thanks to significantly improved healthcare, as well as better living and working conditions, life expectancy has increased rapidly in the past 100 years, from 34.1 years in 1913 to 71.4 years in 2015 [143]. In addition, the child mortality rate fell from 43% of the world’s newborns who would die before their fifth birthday in 1800, due to the poor health conditions, to only 4.3% in 2015. Although 4.3% of all newborns who die in childhood is still too high, it is quite an achievement [144]. Thanks to better food production, the number of famine victims fell drastically from 578 global deaths per 100,000 population in the 1950s to 3 global deaths per 100,000 population in the 2000s [145]. Also, the number of people living in a democracy increased significantly over the past 100 years. In 1900, almost 200 million people, or 11.97% of the world’s population, lived in a democracy. In 2015, that number grew to 4.1 billion people, or 55.8% of the world’s population [146]. Finally, thanks to technological advancements, global poverty has also been reduced significantly in the past 100 years. The percentage of people living in extreme poverty1 [147] dropped from 94.4% in 1820 to 9.6% in 2015 [147]. This achievement is predominantly attributable to the past three decades, because only as recently as 1980 the percentage was still 44% [147]. The third industrial revolution, the information age, which started in the 1970s and brought us mainframe computing, personal computing, and the internet, has enabled millions of people to leave poverty and become connected to the global economy. Unfortunately, 9.6% of the world’s population still live in extreme poverty—that is, 700 million people, which is still 700 million people too many. The vast majority of these people live in Sub-Saharan Africa and South Asia [147]. However, developing countries also still experience poverty, which, unfortunately and interestingly, has been on the rise in recent years, especially in Europe. The International Labour Organization estimated that, in 2012, over 300 million people in developed countries were living in poverty [148]. This high number is linked to the wave of refugees who have fled to Europe in the past three years [149].
There is a wide variety of causes for poverty, which differ by country, but in general the causes for poverty include: lack of education, environmental problems, lack of access to banking facilities, lack of legal ownership of property, lack of rule of law, overpopulation, epidemic diseases, weather-related events, war, and changing trends in a country’s economy. Overcoming poverty is vital if we want to create a world that is peaceful and fair for everyone. Besides which, in 2015 the United Nations adopted its Sustainable Development Goals that challenge global leaders to help end poverty in all its forms, everywhere, by 2030. Therefore, it is time to get to work and lift the remaining 700 million people out of extreme poverty.
The effects of poverty reach every level of our society, and often the things that cause poverty are also the effects of poverty. For example, when hurricane Sandy moved over Haiti in 2012, it displaced over 18,000 people, many of whom were still living in UN camps after the devastating earthquake of 2010 [150]. Those displaced people have to live in poor conditions, directly affecting their health. If they become ill, their capacity to work will be negatively impacted and, with a lack of a social security system in place, the line to poverty is easily crossed. It is often a vicious circle that is difficult to break and the effects of poverty are often passed on from one generation to the next. The effects of poverty are often interrelated, rarely occurring alone, and are, therefore, difficult to solve. Poverty is a true Wicked Problem, which will require the involvement of all stakeholders, collaborating with each other, using the latest technologies to try to break the vicious circle of poverty. Poverty has an impact on different levels within a person’s life or within a country and, to break the vicious circle of poverty, each of these aspects should be approached, ideally simultaneously. That is what makes this Wicked Problem so difficult to solve.
Poverty has a direct impact on the ability of someone to purchase sufficient nutritious food and water. Whether in developing or developed countries, malnutrition as a result of poverty is also a catalyst for poverty. Often, the healthiest and most nutritious food is also the most expensive. For these reasons, people with small budgets often have less nutritious diets due to their dependence on cheaper ‘fast’ food. Thus, their children grow up without the required nutrition, which has an impact on their ability to learn, play, and grow. In addition, too much fast food results in obesity, with all the associated health consequences. Poverty will, therefore, almost always result in severe health effects, whether in developing or developed countries. The lack of nutrition and proper medicine, the (easy) access to healthcare facilities, or the lack of proper sanitation conditions negatively influence people’s life expectancies. In addition, lack of healthcare insurance stops people from seeking care because they cannot afford the treatments or medicine, thereby making their situation deteriorate. Children who are sick or suffer from malnutrition will have difficulty concentrating at school, if they get the chance to attend a school at all. In developing countries, many children are sent to work as soon as they can stand, in order to earn money for the family. Lack of education results in illiteracy, which can haunt them throughout their lives. The effect of illiteracy is that they will have difficulty getting a job, resulting in rising unemployment rates, uncertainty, and a growing informal economy, which limits a government from improving the situation for the country as a whole, due to lack of income. Many of the poor people living in informal economies do not have a documented identity, thereby limiting them from access to many (government) resources and activities. In addition, the rise of robots and automation will make things worse in the coming years, reducing even further the number of available jobs for those who are uneducated. Consequently, social unrest can develop and quickly derail a society. This effect played out during the Arab Spring in early 2011, where a series of anti-government protests, uprisings, and armed rebellions spread across the Middle East. The chaos and lawlessness were fuelled by political uncertainty and quickly led to increased job insecurity and higher levels of poverty.
Breaking the cycle of poverty starts with investing in children and providing them with sufficient high-quality food, a proper education, knowledge, and skills to enable them to realise their full potential. Next to education comes access to affordable proper healthcare (including insurance), access to clean water and sanitation, and, last but not least, economic security and connecting poor people to the (global) economy by offering them an identity, access to banking facilities, and the right of ownership. Economic security includes registration of property ownership, access to banking facilities, and a fair and transparent rule of law, which includes rules that everyone understands and respects. Especially in developing countries these three economic securities (property ownership, access to banking facilities, and rule of law) are often lacking. As a result, these countries often have a large informal economy, which results in less respect for ownership or financial and legal rights, making it expensive to abide by the law.
Informal economies exist in every country of the world, but take up a larger chunk of the gross domestic product (GDP) in developing countries. The informal economy is the part of the economy that is neither taxed nor controlled by any form of government. The larger the informal economy, the more insecurity there is for citizens, which can result in unrest and poverty. Due to a lack of data, determination of the size of the informal economy is difficult. However, Mexico determined in 2014 that the informal economy contributed on average 26% to their GDP over the decade from 2003 to 2012 [151]. That’s a large chunk of the economy that is not controlled or monitored, and therefore affects millions of people.
An informal economy often exists due to a lack of economic security and the high costs of doing business legally. According to research by McKinsey, emerging-market businesses face administrative costs three times higher than their counterparts in developed economies [152]. In addition, the famous Peruvian economist Hernando de Soto Polar, who is a known for his work on the informal economy, views property ownership rights being vital for a strong market economy. De Soto argues that, without adequate participation in an information framework that records ownership of property and other economic information, poverty is difficult to overcome. Next to the absence of property rights, the lack of rule of law [153] and of access to banking facilities facilitates the growth of an informal economy, because it drives up the cost of doing business legally [154].
Unfortunately, economic insecurities and poverty have a negative side effect. Many different organisations try to help poor people, all with the best intentions. However, these organisations operate in isolation, each of them having their own database with information on the citizens whom they try to help. As a result, there is no centralised overview, leaving the person in need without any information or credit history that could be used to improve their situation, while requiring each organisation to maintain their own database. Thus, being poor is often very expensive, resulting in a negative vicious circle and an increase in poverty in already poor countries.
4.3 Reducing poverty with technology
Worldwide, two billion people remain unbanked [155]. This is because traditional systems require that all parties to every transaction be known to the system. However, populations in poorer and developing nations, and those displaced by war, famine, and climatic events, often lack the means to identify themselves formally. If the system can manage the authentication of participants and then handle the exchange, people with no formal identity documents can conduct online exchanges and thereby enjoy the benefits that come with having a secure online financial wallet or bank-like account. As Andreas Antonopoulos observes, Bitcoin may not be as sophisticated as an international banking system, but it delivers freedom and it allows us to unleash creativity [155a].
Of the two billion people who are unbanked, a quarter have access to the internet. By simply downloading a free app, they can have access to an international financial transaction network. For all its faults, this is something that no banking system anywhere in the world can offer.
Increased access to banking, availability of rules of law, and respect for property ownership reduce the size of the informal economy, which has significant advantages including increased government protection for consumers, accumulating government pensions for workers, increased job security for workers, and enabling companies to grow bigger, all contributing to a reduction in poverty. In addition, creating a centralised database for poor people makes being poor a lot less expensive. But that is not sufficient. In order to be able to end poverty in all its forms, we should focus on the different levels of poverty: nutrition, health, education, economic security, and society. If we can use technology, such as big data analytics, Blockchain, and artificial intelligence to give people better access to better and cheaper food, give them good healthcare and a reliable healthcare insurance, give them an education that they can use anywhere, and reduce their economic insecurity, then we have a chance at ending poverty in all its forms globally. There are several ways in which emerging technologies can help end poverty.
4.4 Healthy nutrition for poor people
Eating healthy food is often a challenge for poor people; it is expensive and often difficult to obtain, because not every store will sell it. In developed countries, poor people, therefore, often opt for fast food or food with limited nutrition, which is the worst food possible to eat on a daily basis. In developing countries, the problem is more persistent and often the question is whether there is enough food at all, let alone healthy and nutritious food. Although Blockchain might not at first seem to be a technology that can help, it does offer some advantages. However, most advantages can be achieved by focusing on emerging technologies such as big data analytics and precision agriculture.
One company that has developed an innovative solution from San Francisco follows the adage: ‘Give a man a fish, and he has food for one day. Teach a man to fish, and he has food for the rest of his life.’ In 2009, Brandi DeCarli and Scott Thompson met and worked on the Kisumu Youth Empowerment Center. They worked on modified shipping containers built around a soccer field to offer basic services and resources in education, health, and sport for the local youth [156]. Their work at the Kisumu Youth Empowerment Center resulted in a plug-and-play model for agriculture, developing self-sustaining, smart, modified shipping containers for agriculture. The ‘Farm from a Box’ is a unique concept that offers all the necessary equipment to run a small, off-the-grid farm in a single shipping container. The container is fitted out with solar panels and batteries for creation and storage of renewable energy. It also has water filtration and micro-drip irrigation equipment, sensors, and an on-board computer for soil monitoring and land mapping. The self-sustaining container can be placed anywhere in the world and is sufficient to support farms one hectare in size, which happens to be the size of most farms in the world [157]. The Farm from a Box costs between US$25,000 and US$40,000, depending on the level of technology inside, but it offers the farmers a way to grow more food and more types of food, and become less dependent on the weather or power local power supply. The Farm from a Box is capable of feeding 150 people.
Farm from a Box brings together emerging technologies such as precision agriculture (which is a farming concept based on detailed monitoring of the crops and constant adjusting of the precise nutrition to optimise the output), Internet of Things, and big data analytics. The shipping container offers a farmer everything that he or she needs to create healthy and nutritious food for the community, while creating a steady stream of income. Although the Farm from a Box does not require integration with blockchain for it to be a success, doing so could improve its outcomes even more. Now imagine that the Farm from a Box is connected to the local power grid and the farmer can give back any excess energy to the local energy grid, as we shall see in Chapter 6, which stores the records of these transactions on the Blockchain and instantly pays the farmer in bitcoin or another cryptocurrency. It would offer the local farmer an additional stream of revenue, while at the same time offering the local community clean and inexpensive energy. In addition, if the farmer could accept bitcoin, or any other cryptocurrency, he or she could avoid dealing with banks and cash money. This would improve the farmers’ financial security, because digital money cannot be robbed in the traditional way, and give the farmer full control over his or her digital money.
In 2016, the concept of Farm from a Box planned several pilots: one in California and one in Ethiopia as well as another unit with resettled refugees from Nepal, Bhutan, and Afghanistan in California [158]. The shipping container empowers the local community by decentralising the food production. When a local community is empowered to grow and sustain their own crop, whether in developing or developed countries, it will be better off and more resilient.
Healthcare is an industry that offers tremendous scope for improvement thanks to emerging technologies. Healthcare organisations tend to have a vast array of data stored across the organisation, ranging from patient, medicine, and supplier data to financial, insurance, and staff data. Healthcare organisations can mix and match their data, combine it with valuable external data sources, such as social media data, to enable the healthcare organisation to better determine risks (including financial risks, clinical risks, or operational risks), predict operational performances and act accordingly, and create a single view of the healthcare organisation as well as the patient at any given moment in time. However, at this time, much of this information is stored and conveyed in handwritten notes or faxed between healthcare professionals and centres and their support organisations. This old-fashioned system satisfies regulatory requirements for protection of patient data, but is plagued by delay, handling failures, and errors. This is a security problem in need of a reliable and trustworthy solution. A complete overview of the patient can eventually lead to personalised medicine that will offer the patient better treatment than standard medicine. Combined with emerging technology such as artificial intelligence, Blockchain and drones, healthcare can be significantly improved.
Imagine a future healthcare organisation for rural Africa that created a Blockchain-based Electronic Health Record for patients in Africa. The organisation, let’s call it AHealth, has partnered with many local doctors and provided them with tablets to record any patient data, which will be stored on a permissioned, private Blockchain. The first time someone visits a doctor who is a partner with AHealth, the doctor will create a new patient record that will include a variety of personalised identifiable information such as name, address, age, height, weight, blood type, and perhaps even a DNA sample. All the information will be tokenised, encrypted, and stored on the Blockchain. The patient is in full control of who has access to his or her personal data, similar to the self-sovereign identity discussed in Chapter 3. Using a centralised storage system, as is common these days, would not be sufficient, because it would take away control of the data from the patient. Only the patient and the doctor will be able to view any patient-specific data and, if another doctor or organisation needs to get access to the data for health reasons, the patient can release only information that is required, cryptographically, using the private key on a smartphone. No longer does the patient or doctor have to carry paper documents on different patients, with the risk of losing them or mixing up records.
Next to this, AHealth has deployed, in many rural villages, self-scanning connected devices that enable a patient to monitor a variety of physiological parameters: blood pressure, temperature, heart rate, and pulse oximetry. The system uses artificial intelligence to understand what is wrong with the patient. If a patient does not feel well, he or she can login with his or her smartphone, perform several tests, and the data is automatically added, securely (tokenised and encrypted), to the details on the Blockchain. The doctor will get a ping to view the results if approved by the patient and, in case medicine is required, the doctor will order the medicine, via a smart contract deployed on the blockchain, at the local or regional pharmacy which has also partnered with AHealth. The pharmacist will prepare the personalised medicine and a secured drone will automatically deliver the medicine to the patient.2,3 The patient can retrieve the medicine only through a biometric verification and, as soon as the medicine has been taken out of the delivery drone, the delivery is confirmed and the smart contract will automatically transfer the crypto-funds from the patient’s healthcare insurer to the pharmacist, ensuring that everyone in the supply chain is paid a lot sooner than is currently the case. The patient uses the medicine and will report any progress back to the doctor, which will be added to the Electronic Health Record on the blockchain. In cases of more severe health problems or when a patient needs to be transported to hospital, the advantage is that the hospital has access to all the records of the patients, including any medicines that have been delivered by drone, and so can develop a better treatment for the patient. Thanks to the Blockchain, AHealth has created an efficient healthcare system that spans vast areas of land and delivers cheap and reliable healthcare to the far corners of Africa.
At this time, this scenario is of course still science fiction—albeit inspirational—and will probably remain so for the coming years. However, it shows the power of blockchain technology by securely (tokenising and encrypting) storing any patient data on a blockchain, and giving full control to the patient who has access to that data, while at the same time preserving any private information about the patient (as mentioned, any personal data such as biometrics or DNA should never be put as is on a blockchain). Blockchain technology, or more specifically a self-sovereign healthcare identity system, would give patients and doctors all the advantages of digital records while ensuring privacy for the patient. Of course, any company dealing with health data on blockchain should ensure privacy for its users by giving full control to the user and ensuring that data remains private. This could be achieved, for example, by using Zero Knowledge Proof (ZKP). ZKP ensures that data can be shared without leaking personal information and one party can prove a certain fact without revealing that information. However, giving full control of healthcare data to the patient also creates a significant challenge, because, as discussed in Chapter 3, the Public Key Infrastructure is an important aspect of this. Loss of the private key would cause problems for the patient to remain in full control. Therefore, any start-up working in this field should offer solutions for when individuals lose, for whatever reason, access to their private keys.
Although this particular fictional scenario is still far away, fortunately different Blockchain start-ups are developing solutions to improve healthcare for poor people. One of these companies, BanQU, focuses on the ‘last mile’ of healthcare. Often, the last part of the healthcare supply chain is the least developed, resulting in poor infrastructure, inaccurate records, and inadequate storage and tracking mechanisms [159]. Blockchain can help improve the health supply chain, by creating a reliable, controllable, and effective connection between patient and health provider. The company BanQu, which according to their website, are on a mission to end poverty using Blockchain technology, is already capable of creating a smart contract that will automatically release funds to a drug manufacturer for medicine required by a patient. The smart contract will automatically pay the state health worker if needed and there is a reduced inventory because medicines are shipped only when actually needed [159]. Although the imaginary company AHealth may seem far away, parts of it are already possible and in action today.
Africa is the world’s youngest continent, with over 50% of people aged younger than 15 years [160]. Unfortunately, in a fifth of the African countries, less than 30% of these children are enrolled in school [161]. Reducing poverty is a long-term process and starts with children having the ability to learn and use that knowledge to create a better life for themselves and their families. In most poor families, especially in developing countries, children have to work to support their family. They do not have the time to go to school, play with friends, and learn new things in the same way that children in developed countries can. A lack of education is the starting point of the vicious circle that keeps people poor, because, if you cannot become educated, you cannot climb the social ladder. Therefore, if we wish to solve poverty for good, there needs to be a focus on improving access to education as well as improving the quality of education itself. There are already a lot of charities and initiatives that focus on education for poor people and provide help in building schools, providing materials, educating teachers, and offering scholarships for talented children.
If we truly want to enable children, as well as adults, in developing countries to be educated, we need a new system, one that is scalable and offers personalised learning for children, particularly in rural areas. However, access to education is only one aspect of this Wicked Problem. Next come the limited availability of qualified teachers, sufficient materials and schools, lack of energy to run schools, and many more, smaller and interrelated issues.
Another major aspect of this Wicked Problem is proof of education, which is almost as important as the education itself. If you cannot prove that you have a degree from a certain college or university, you will still encounter difficulties in obtaining a job to match your skills. Fortunately, Blockchain and emerging technologies such as big data and artificial intelligence seem to offer a good shot at solving many of the different interrelated problems. Blockchain for educational purposes is very new and, at the time of writing, there have been very few examples of organisations or start-ups applying Blockchain for educational purposes, let alone using it to improve education for poor people. Nevertheless, the potential for Blockchain to improve our educational systems is vast. Blockchain can completely revolutionise education by making it more accessible to anyone, and giving children a fair chance to learn and prepare themselves for the real world.
The education foundation KnowledgeWorks, which focuses on personalised learning and strategic foresight, released a report in 2016 that explores the impact of emerging technologies such as Blockchain, big data and artificial intelligence on the education system. The report gives an insight into how these technologies can transform the model of education delivery from a centralised to a distributed one—and in so doing can make learning much more personalised [162]. The report considers four scenarios over the next decade on how technology can revolutionise the education system. Although the report focuses on the USA, it does give us an idea of the possibilities of what Blockchain can do for the education system. In brief, the four scenarios are [163]:
1 Blockchain-enabled administrative and financial backend for schools to optimise and automate managing student/employee/school records in a private and secure way. The actual delivery of education remains the same, with a focus on in-person teaching;
2 Education-as-a-device delivered as a plug-and-play content delivery service. Machine learning delivers customised lessons and any achievements and activities are recorded on a blockchain. Smart contracts automate everything and mediate across students, teachers, parents, and the schools. The rich data can be sold, securely and privately, to offer schools more profit;
3 A DIY education system built on a permissioned blockchain, where smart contracts help students to access resources, enable membership decision-making, and automate payments. It operates as a Decentralised Autonomous Organisation (DAO) separate from classrooms, districts and teachers;
4 Blockchain-based ecosystem management tools enable schools to deliver a unique, decentralised education programme for the students. Students can define coursework and hire experts or seek guidance. All data, including certificates, is recorded on a blockchain and smart contracts automate everything.
The four scenarios show the different possibilities that emerging technologies offer for the education system. In each of the four scenarios, Blockchain plays an important role in enabling the record of progress, achievements, and certificates. In some of the scenarios, big data and artificial intelligence will automatically and autonomously develop personalised learning programmes. Of course, this is still far away and the closest we currently have are the Massive Online Open Courses that are developed on multiple platforms such as the Khan Academy, EDx, or Coursera. The future offers great possibilities for developing true personalised learning and Blockchain will be able to record any of the achievements. Some of the first organisations and start-ups that are experimenting with such possibilities at the time of writing are set out below [164]:
• BadgeChain is an open community discussing uses of blockchains for education;
• The Sony Global Education division developed a platform for educational assessment and testing scores based on the Blockchain, which can securely share data with other services or third parties [165];
• otlw.co developed a Blockchain system to secure universal assessment of skills and knowledge. They also developed otlw-publish, which facilitates the distribution of micropayments;
• Various universities are experimenting with authentication and delivery of academic certificates on the Blockchain, including MIT Media Lab (in 2016 they released a new open standard, ‘Blockcerts’ [166]), University of Nicosia, Holberton School, and Ecole Supérieure d’Ingénieurs Léonard de Vinci.
The future of education offers poor people a new shot at leaving poverty through becoming educated. The current rate of technological developments is exponential, also in the educational sector, and Blockchain and AI could revolutionise education in the coming decade. In fact, the World Economic Forum predicts that, in 2030, the largest internet company in the world will be an educational DAO—a company that uses big data analytics and artificial intelligence to develop personalised learning courses on the spot, based on a detailed profile of the student [167]. Add Blockchain and smart contracts to the equation and you have an educational DAO that can help reduce poverty by offering poor people a chance to become educated.
4.7 Ensuring property ownership
Correctness and completeness of property ownership registration are vital, as is the prevention of unauthorised and fraudulent changes to data records. As such, blockchain technology is perfectly suited to register ownership of property, of anything digital and non-digital. It will protect the rights of the owner (in the case of theft), enable easy resolution of disputes, enable correct transfer of ownership after sale, and prevent fraud, because any records are immutable, verifiable, and traceable.
Already, multiple countries are considering the possibility of adopting blockchain technology to register and record land title ownership. Countries such as Sweden [168], Honduras [169], and Georgia [170] are testing Blockchain technology, although Honduras’s attempts have recently stalled [171]. They are developing a land registry that is transparent, enables easy registration, and respects land ownership. Registering property ownership, such as land titles, on the blockchain has multiple advantages, such as significantly reducing manual errors, while improving security processes for transferring documents, mortgage, or contracts [168].
Blockchain enables irreversible records of ownership, because, once data is on the blockchain, it can no longer be tampered with. In addition, the usage of smart contracts will enable automatic transfer of ownership if the right conditions have been met, protecting the seller as well as the buyer from fraudulent actions. Therefore, Blockchain ensures easy and safe registration of property ownership. When property ownership can be proven easily, the person has a better chance of prospering in a capitalist society:
With titles, shares and property laws, people could suddenly go beyond looking at their assets as they are—houses used for shelter—to thinking about what they could be—things like security for credit to start or expand a business.
(Hernando de Soto [172])
Once owners have been able to document their ownership, it gives them a possibility of proving their existence, which in turn increases the possibility of accessing banking facilities. Recording ownership can also help solve corruption, which is also a large problem related to ownership in many countries, but we turn to that in Chapter 5.
4.8 Access to (cheap) banking facilities
Financial inclusion is an important step towards reducing poverty, because it offers people more freedom to save and spend money how, where, and when they like. Unfortunately, for poor people it has become very difficult to open a bank account and/or get a loan to improve their lives or build a business. Either they do not have the right ID, which can be solved using a self-sovereign identity, or they do not have a credit history, which makes it almost impossible to access banking facilities. As a result, they are forced to save in livestock, which is obviously not very liquid if essential items such as medicine need to be bought. In addition, a transaction fee of US$0.50 on credit card purchases represents almost a third of the daily income for extremely poor people who live on US$1.90 a day.
Blockchain technology is rapidly changing this, something that we can already see with Bitcoin. Bitcoin enables everyone with an internet connection to open a wallet and start receiving and sending money, without the need for an ID or a credit history. For many developing countries, this might be nothing new. They have been using pre-paid mobile phone minutes as a currency for years. Mobile airtime minutes, or credits, can be transferred between phones or dealers, or shown to owners to purchase or barter for goods and services [173]. This is similar to tokens or crypto-coins on a blockchain, albeit less secure and more open to fraud.
When Blockchain and crypto-coins are used, they offer a wide variety of new products and services for poor people, for a fraction of the cost, which could significantly improve their lives. Examples include microloans, or payday loans, for a fraction of the cost of traditional (payday) loans. The company Wayniloans developed a bitcoin-lending platform, which is gaining power in Latin America. They offer multiple loan services, including cash advances, peer-to-peer loans, and business loans, using the bitcoin blockchain for a much lower rate than traditional lending companies.
Another area that can drastically improve the lives of poor is people Blockchain-enabled remittances. Today, over US$410 billion [174] in remittances flow to developing countries, with an average cost of 7.4% [175] and up to 12% [176] in certain regions. Remittances are expensive, opaque, and recurring transactions of necessity, with the costs borne predominantly by poor people [177]. Blockchain can offer enormous improvements in cost savings for poor people who send money to families in another country. Not surprisingly, there are multiple start-ups and organisations [178], including the United Nations, that are developing blockchain-based remittance services [179]. A blockchain-based remittance service uses a crypto-coin to transfer money instantly across the globe for a fraction of the cost, and uses local agents to exchange the crypto-coin into the local fiat money that can be used by the receiver. Instead of a transaction taking days to process and costing a fortune, it takes minutes and is significantly cheaper (despite the challenge of high transaction costs currently linked to Bitcoin, as explained in Chapter 2).
Finally, trustless lending can enable smart property and smart contracts for the delivery of financial products to poorer customers. Use of the property owned by individuals or the combined wealth of groups of borrowers as collateral can make the provision of credit more widely available, more competitive, and therefore cheaper. These mechanisms ensure that lending is available to a greater percentage of the community. Smart contracts can also automate repayments, thereby reducing the risk of contractual disputes [180, p. 15].
4.9 Society and reducing uncertainty using rule of law
Rule of law means that a country and its people, including the government, should be ruled by law and obey that law. In addition, the law should be such that people will be able, and willing, to be guided by it [16]. In other words, both the government and the citizens know the law and obey it [181]. Rule of law is the principle that law should govern a nation and not the arbitrary decisions of individual government officials. Therefore, a lack of rule of law will increase the informal economy because it becomes more expensive and difficult to do business legally.
Obviously, a country’s law cannot be stored and enforced through a blockchain in its entirety, but separate aspects of it can when adopting smart contracts. Already, Blockchain is having a profound impact on the legal industry and lawyers are trying to understand how it will affect their business. Blockchain and smart contracts can be used to transform legal contracts into code, which is understandable and indisputable across legal jurisdictions.
As mentioned earlier, smart contracts can be viewed as software programs that use Boolean expressions and algorithmic determination to perform certain actions. Smart contracts automatically execute when a predefined condition is met and, as a result, cannot be ignored. All too often contracts are simply ignored, payments delayed or bluntly refused, and disputes need to be resolved in court, costing a lot of time and money for the parties involved. Smart contracts, if developed correctly and securely, could prevent this, because the contract will automatically execute only once certain pre-set conditions have been met. As such, it becomes easier for organisations and citizens to obey the law and abide by agreements that have been made, making it cheaper to play by the rules and reducing the informal economy.
Of course, there are many technical and organisational challenges that need to be solved and not all contracts can be transformed into Boolean expressions. Smart contracts cannot operate in a vacuum and the legal framework remains important. However, when smart contracts become common in developing countries, the potential is enormous.
Blockchain enables multiple stakeholders to access, as well as add to or update, records in a shared database. The major advantage is that those organisations that are part of the public, or private, blockchain always have an up-to-date, single version of the truth. For the financial services industry, this reduces settlement times, costs, and the risks of fraud and errors. However, those same benefits apply to (not-for) profit organisations that aim to help poor people.
Multiple organisations, especially in developing countries, try to help poor people and sometimes they assist the same people over prolonged periods of time. However, as data about these relationships is stored in silos, it cannot be used to build up a credit history or other important evidence needed to get things done, access money, or transfer ownership of property. If multiple organisations would use the same, distributed database, and citizens would have a self-sovereign identity, individuals could build up a profile that could be very useful to them, as well as to those organisations trying to help the individuals. It will save them a lot of time and effort, because they do not have to constantly provide their details and update them across multiple organisations.
Once multiple charities start collaborating and using the same shared database, it could make the entire process of helping poor people a lot more efficient, effective, and cheaper. This would improve the lives of poor people because it gives them an economic profile that could be used for various other activities, as discussed in Chapter 3.
The future of poverty should be non-existent, meaning that, as per the UN goals, by 2030 poverty will be gone from the world. Big data analytics, artificial intelligence and Blockchain will enable us to achieve this audacious goal, but only if multiple organisations across the globe collaborate.
The poor don’t lack capital; it’s that they can’t monetize it. Fixing that, is the most important thing you could ever do to foster economic growth.
(Hernando de Soto [172])
If they do, property rights on a blockchain could prove ownership of, for example, a house or a piece of land. A distributed ledger containing a tokenised and encrypted 360 degree economic profile of citizens using a self-sovereign identity, which is used by multiple organisations, could provide a (credit) history for poor people. The combination can be used to obtain a loan, instantly, through a blockchain-powered financial institution at very low cost, which will enable poor people to improve their lives and create or grow their business. With the right smart contracts, rule of law can be enforced automatically, thereby reducing the cost of doing business legally and reducing the number of informal economies. This could improve government regulation and increase tax received, which in turn could improve the stability and economy of a country. Blockchain can truly be a paradigm shift for poor people because it offers them the opportunity to improve their lives, monetise their (digital) capital and leave poverty behind.
Notes
1 A person is considered to live in extreme poverty if the person has less than 1.90 international dollars to spend every day.
2 In 2017, Walmart revealed plans to start using drones to deliver goods, benefiting from blockchain technology to ensure that the goods are dropped off securely.
3 In 2017, the company Zipline tested and launched drone delivery of medical supplies in Rwanda.