Few topics are trendier in modern technology magazines than the discussion surrounding the potential within the technology behind Bitcoin. Specifically, the Blockchain ledger the site utilizes to underpin it’s operations and maintain a working record of all transactions. The open ledger system is viewed by most as brimming with potential. Dozens of start-ups all over the globe are attempting to use the technology in almost every major industry; soon blockchain technologies may revolutionize the way we manage ports, keep information private and share files.
Part of the appeal of the system to entrepreneurs is its vast growth potential – Blockchains, by definition, are natural decentralized, and therefore do not require intensive management or investment. They’re also safe – a core feature of the decentralized system operates without the use of a central entity and the mathematical scrambling needed to create the ledger itself is enormously secure. This appeal of a cheap and safe system that allows for data storage has investors in the developed world excited and those in the developing world salivating.
Something as simple as a tamper-proof land registry has long been thought of as a pipe dream in multiple nations in the Global South. This innovation has the potential to reduce the need for intermediaries like notaries, thereby reducing the influence of corruption. If corruption is removed, the perceived barriers for investment into data infrastructure will be lowered, and once-shunned economies may suddenly appear to be bastions of opportunity. Development funding may find new niches in the areas of data infrastructure, allowing the developing world to skip several phases and launch into a digital age of prosperity via peer to peer sharing.
The current model is Honduras: the government in Tegucigalpa currently stores land ownership records in the unsecured basement of a “nasty old government building”; “anyone could come in, pull a book down, open the spine and replace a title record.”This practice, the government admits, was commonplace in Honduras – as it is in much of the world, where ledgers are not kept tidy, secured or are often placed in the hands of the corrupt. Honduras has been in active talks with an American start-up promising to utilize their blockchain technology to create a ledger for land owners to register their homes. This solution would, in theory, offer a more transparent and secure system that could be freely offered to citizens.
This technology’s practical application can expand far beyond housing ledgers: One key growth avenue is the adoption of this technology by the banking sector: Deutsche Bank, UBS and ICAP recently collaborated upon the “Utility Settlement Coin”, a prototype virtual currency whose primary use would be in settling mainstream financial market transactions between banks. The digital advantage would mean settling accounts in seconds instead of days – and redefining transactions occurring in “real-time”. Digital currency could also rewrite national financial sovereignty by creating a potentially international currency union? Keynes would be thrilled.
There are problems. A decentralized financial system, such as Bitcoin, can serve admirably as a secondary currency in the developed world. But it requires secure and regular internet access. It also fails to offer what is needed most in developing nations: political reform. Overhauling ineffective banking systems on the ground is no easy task, but dependence upon a cryptocurrency will remain a pipedream firmly set apart from reality if concessions about inequity and inaccessibility are not adjusted for. Discussions about the capacity of the internet of things and the growth of decentralized currency can be perceived as putting the trendy digital cart before the still-biological horse.
It’s clear why everyone from Mario Draghi to Mark Zuckerberg is excited about the Blockchain: it may very well change the way we do business. But the question remains: will it be yet another system that fails to serve the third world? Or will it usher in a new age of access, providing developing nations with the opportunity to grow? How equitable this trend will be remains to be seen.