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3 ways Bitcoin can change development

3 ways Bitcoin can change development

By Alison Rabe & Steven Worley

You might have been hearing about Bitcoin in the news lately. Maybe you’re already familiar with it, but odds are you probably don’t know the details. Bitcoin is breaking barriers as the world’s first de-centralised digital currency. Basically, Bitcoin is digital money you can send person-to-person via the net and without a third party. This means fees are much lower, accounts cannot be frozen, and there are no pre-requisites or limits to having a bank account.

Bitcoin has innumerable potential uses; below are three ways it could revolutionise development.

1. Local charities can accept donations.

Developing countries desperately need locally informed, well-financed giving. Strong local organisations create local leadership, grassroots power sources and more successful, sustainable solutions. Unfortunately, many NGOs are headquartered in developed countries, and accept donations centrally and then parcel them out to local partners abroad. The donor can only hope their donation will eventually trickle down to the communities he or she had hoped to help. Giving to a charity abroad seems too out-of-reach and vulnerable to fraud.

Bitcoin allows donors to give directly to organisations abroad, without needing a headquarters to vet and meter out donations. A local non-profit can put a wallet address on their website to accept Bitcoins from donors. It’s a completely secure transaction that doesn’t need a bank or financial institution’s involvement. And, Bitcoin is a public ledger, meaning it allows donors to track exactly when, where and how their donations move.

Even better, accepting Bitcoin is free, there are no chargebacks, and no fees go to PayPal or Visa. (PayPal charges 2.2%+$0.30 per transaction; credit card companies charge around 1.5-3% per transaction). The donation goes much further—directly to the local organisation and the good work they do, and 100% of the contribution is actually donated to the beneficiary. Plus, no-fee technology opens up charities to donors interested in giving smaller amounts of money.

Tipping technology is already at work on the Internet, allowing users to donate small amounts of Bitcoins to things they like, instead of fairly useless upvotes, likes or re-tweets. Social media is being transformed into a portal to give donations, and the ChangeTip app even allows people to transfer Bitcoins on Facebook. Organisations or individuals can fundraise simply by posting pictures or stories of the meaningful work they’re doing on social media. Many non-profits, in both developing and developed countries, are already accepting Bitcoin with success. Why not create a wallet?

Clipart saying "Bitcoin accepted".
Clipart from OpenClipart.

2. The “un-banked” can have access to banking.

Imagine life without a bank account. How would you start a business? What if you wanted to export products? What if you wanted to sell your paintings, handmade clothes, music or e-book online? How would you get paid? Half of the worlds adult population does not have access to banking. If someone wants to create a digital product and sell it online, they can’t get paid. They’re effectively removed from the formal global economy, and they know it.

But what if they could get paid? Would it inspire them to create more and to tap into new markets? Could it bring them more wealth? It already is. I Have Bitcoins, a Bitcoin news site, is helping artisans in rural India sell their paintings to a global market in exchange for Bitcoin, and they take no commission. Instead of selling paintings for next to nothing to exporters who mark up prices dramatically, the artists can benefit from the purchasing wealth of developed nations. With the aid of a smartphone created for developing countries, which Mozilla makes for $25, rural artisans can open their own businesses in the global marketplace.

Further, without a bank account allowing for international wire transfers, most people use companies like Western Union to send money to their families abroad. Transferring remittances is generally exploitative, with the poorest countries being charged the highest fees. For example, Western Union charges $95 (9.5%) to send $1,000 to Kenya, which is about the average international remittance fee.

BitPesa, a remittance company that uses Bitcoin, is able to charge $30 (3%) for the same transaction, thanks to Bitcoin’s efficiency. Kenyans living abroad send about $1.2 billion home each year. By using more efficient remittance methods built on top of Bitcoin, Kenyans could increase the money in their pockets by $78 million. In a country with a GDP of $55.2 billion, that’s not an insignificant number. And this is an average example, not an outlier. Some remittance corridors, such as from South Africa to Botswana, take average fees of around 23%, meaning the impact of BitPesa could be even higher.

3. Unalterable records of rights & transactions can be created.

In many developing countries, legal rights and transactions might not mean much. Powerful individuals, companies or governments can trump or break agreements and violate rights with impunity. Small- to medium-sized business owners have no reliable way to enforce contracts, while individuals or communities struggle to assert their property and identities. In Cambodia, big businesses easily trump the government-recognised land rights of individuals or communities. In Kenya, young mothers are run off their land if their husband dies. In Bangladesh, the Bihari people are repeatedly denied citizenship.

Bitcoin is more than just a currency. Its underlying technology is called a blockchain, which allows information to be recorded in secure, open and decentralised transactions. The blockchain and technologies built on top of it allow for the creation and registration of “smart contracts” and “smart property,” which cannot be altered. The contracts are irreversible and can be self-executing, without the need (or opportunity) for human intervention.

For example, someone can write and register their will on the blockchain, with instructions to transfer their property to their family upon their death. Third-party services can then regularly search for the death record; upon the death, the property is automatically transferred. Property assets and transfers can also be documented, and certain types of business contracts can be automatically carried out upon the fulfilment of set conditions. People wanting to prove their citizenship or right to vote can record their identities. See Counterparty, Factom and Blockchain ID to learn more about some applications built on top of Bitcoin.

All of this is open, unalterable and public on the blockchain. The ability to permanently secure property, transactions and identities online is significant in countries lacking the rule of law. It won’t always guarantee enforcement, but it has the potential to.

Bitcoin is a revolutionary technology that’s not going away anytime soon. There are many more potential use cases than the three we mentioned here, so go create that wallet!

Steven Worley fell into the Bitcoin rabbit hole in 2012 and has worked on several Bitcoin-related ventures since. He’s now a consultant and is active in the South Florida Bitcoin community.

Featured image shows a pile of mock Bitcoins. Photo from Flickr.


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Alison is a U.S. attorney with a diverse background working in human rights issues in Southeast Asia, West Africa and Central America. Her repertoire includes land tenure, legal empowerment and aid, indigent defense and anti-corruption. She is currently in Miami adjudicating refugee and asylum claims and spending lots of time on the beach.

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