There’s a lot of hype around the idea of the Blockchain right now. Businesses, governments, charities and universities are all investigating which of their core processes are likely to be disrupted by this business-changing technology, and there’s a general feel that we’re on the cusp of taking the Blockchain out of the labs and into the real world.
But with all tech trends traversing the hype cycle, separating the do-ers from the say-ers is not always the easiest of tasks. At this year’s Blockchain Week in London, Shane Ninai of Day One Investments spoke about how Papua New Guinea is revolutionising the way it approaches finance for the unbanked by exploring Blockchain systems in the real world.
Blockchain technology has the potential to digitise trust. Built correctly, systems and processes can be created to take power out of the hands of a few and spread amongst the many – and the ‘distributed ledger’ element of Blockchain technology means that the need for a middle man ceases to exist. It does this by basically creating a ‘chain’ of data recording transactions between parties, but as it is open to all, verifiable and cannot be retroactively altered, it is a corruption-free system.
So when considering how to tackle the issues around financial inclusion, the Blockchain is an obvious choice for building new tools. As Ninai explained, 85% of the worlds’ population is currently termed ‘unbanked’ – not part of the traditional Western system of bank accounts and social security numbers allowing for access to credit, land ownership and the like. Surely, he argued, it makes more sense to build new models for the 85% as opposed to trying to ‘fit’ them into systems which don’t support their environment.
A prime example would be a farmer in Papua New Guinea: he might have several cattle, sheep and chickens, and a large area of land on which to farm them, making him a rich man within the confines of his own ecosystem – a village – but if we were to look at his assets through ‘Western’ eyes, he would be a poor man without the ability to formally trade. A system that allocates deserved worth to the farmer without the need for monetary value bypasses the rules and regulations of the high-growth markets such as the UK and US, and immediately provides the farmer with liquidity – a crucial step forward in increasing access to the global markets for those who are currently ‘unbanked’.
But here is where Blockchain technology is truly tested. As Ninai says: “All the Blockchain does is allow digital tokens to be moved between participants – whether they have value or not is a totally different issue.” It’s here that the conversation moves beyond the realms of tech potential and into policy. It is up to the Papua New Guinea regulators and public banks to assign value to models built on the Blockchain. Without their backing, new solutions cannot gain the recognition and gravitas that they deserve. Luckily, the Central Bank of Papua New Guinea and the province of East New Britain are pioneering this alternative economy – paving the road for other markets to follow suit in the coming years.
When organisations are comfortable in accepting that there’s value in this kind of system, with which they can trade and make loans against, we will truly have a revolution in the financial services. But the proof will most likely come not from advanced economies looking to innovate and disrupt, but rather emerging markets looking to gain broader access.
If you take a moment to consider what money really is, it’s just a substitute for something else’s value. The way we trade globally on computers, using automated algorithms, using continuously changing stock tickers – it’s really just numbers on a screen. Why can’t digital tokens hosted on the Blockchain – a system that all can have open, free access to all – be that same substitute?
We’re in the ‘Blockchain for X’ stage in developed countries – and that’s exciting on a smaller scale for unique use cases – but what’s truly exciting is the potential for the emerging markets to totally change the concept of financial worth. It seems Papua New Guinea is worth keeping an eye on…
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