How the right Blockchain can be a secret tool to boost an emerging economy ?
How Blockchain Can Help Emerging Economies?
To illustrate the need of Blockchains in emerging economies let me tell you an incident. Once upon a time there was a king who cared for his people a lot. His kingdom was doing well. One year there was a drought and as a the crops failed.
The people had no food and their savings depleted.They began to suffer and in order to support his populous the kind decided to send out money. So the kind ordered his minister to distribute 100 gold coins to every person. The minister in charge though 100 gold coins is a lot so why not keep ten and send out 90 for the people of his kingdom.
so out of the bag her took out 10 gold coins per person and send out 90. His subordinate thought the same that 90 Gold coins are a lot and kept 10 coins for himself. The chain of flow continued from the kings capital to the state, district and the villages where the money was to be distributed.
In the end by the time the funds reached the village chiefs they got only 10 gold coins. The village chiefs thought 10 gold coins are a lot and they pocked the 10 coins themselves and instead gave out one silver coin to the people. Then some one had a brainwave and thought instead of one silver coin let us give the people 100 copper coins. Whose value was less than one silver coin. So everyone seemed happy from the king who sent out 100 coins to the recipient who got 100 coins.
Ignorance is bliss so the gold got converted to silver and silver to copper and no one got to know so no one complained!
How this story is relevant for emerging economies ?
In a lot of emerging economies there are situations where the king or the modern era state or the government needs to give out some monitory benefits to its people. Large populations are the key common factors of these economies.
A similar flow is followed from the government to the end user. At every stage some funds are getting depleted. This depletion is on account of multiple handling or creation of false records.
In the end despite the government wanting to help its citizens in their hour of need the benefits reach them only on paper.
How a blockchain can come in handy in this situation?
The records of these benefits stay locked in files to which no one has access.
Instead if the flow of funds is logged on a blockchain it is for everyone to see and can be validated independently.
Besides a blockchain can do away with the need of multiple levels of transfer.
Instead the benefits can be transferred directly into the account of the end recipient.
This is result in saving the cost of fund transfer at every stage.
What is the cost of fund transfer ?
Suppose a person A wants to do a fund transfer to a person B He goes to his bank and says he wants to send $100 or its equivalent to person B The bank takes a fee for example $10 to Send $100 to person B
In the case of a country or a kingdom the cost of transfer also exists from the central govt. to state to district cities and villages. The cost is both in terms of money as well as time.
Plus it is an opportunity for bad actors to come into the picture and have a share of the money. A block chain can replace a a broken/ leaking administrative system as well as work as a more effective public ledger to ensure the funds reach the right people. One way of doing this could be that each citizen has a wallet address on the blockchain so the government can send out the tokens directly to its citizens. These tokens can be used as money or redeemed for cash at a bank.
How this system is better than current financial systems
Though there is a lot of talk about govt. doing direct transfer of funds to the beneficiary accounts but such claims cannot be validated independently. Logging such details and transaction on a public blockchain can make the system more transparent. A combination of public and private blockchains can ensure that sensitive financial information is not left out in the open yet the claims and counter claims can be verified.
Can Blockchain Help only the Emerging Economies?
The concept of an emerging economy is rather a fluid one. Even developed economies are facing a lot of financial strain and there are plenty of use cases where blockchains can be used not just for financial transactions but for other transactions and record keeping as well. So be it developing or developed economies Blockchain provide a new improved way to develop and execute solutions to current and future challenges. However a point to be noted is that not all blockchains are equal. Different blockchains are suited for different tasks very much like there are different technician and repairmen for different tasks.
source So please do not make binary decisions about Blockchains and crypto being good or bad. Instead try to understand the use case for which they are designed.
Posted Using LeoFinance Beta
