When most people hear the wordblockchain, which refers to a type of decentralized ledger technology, they immediately connect the term with cryptocurrencies. However, it is important to keep in mind that bitcoin just happened to be one of blockchain’s earliest and most popular applications; most experts believe that the potential for other applications of blockchain technology is vast.
Key Takeaways
- In the most general sense, a blockchain is a system for recording information, although it is distinct from a typical database in the way it stores information; the information in a blockchain is stored in such a way that makes it difficult or impossible to change, hack, or cheat the system.
- This impressive technology provides the support necessary for the decentralized, anonymized tracking and transaction of digital currencies around the world.
- While blockchains allow for cryptocurrencies to function, their functionality has applications beyond cryptocurrency.
- In diverse countries such as India, Kenya, and East Africa, blockchain technology has found uses in banking and financial services, supply chains, agriculture, and in managing land ownership records.
What Is Blockchain Technology?
In the most general sense, a blockchain is a system for recording information, although it is distinct from a typical database in the way it stores information; the information in a blockchain is stored in such a way that makes it difficult or impossible to change, hack, or cheat the system.
Blockchain technology promises a secure, peer-to-peer mechanism forverifying information. Each "block" in a blockchain contains a record of transactions in a decentralized ledger. Taken together, the blocks form a “chain” in a peer-to-peer network.
Applications for Blockchain Technology
This impressive technology provides the support necessary for the decentralized, anonymized tracking and transaction of digital currencies around the world. While blockchains allow for cryptocurrencies to function, their functionality has applications beyond cryptocurrency. For example, banking and fintech payment companies have already demonstrated a major interest in blockchain technology.
From insurance and real estate to crowdfunding and data management, the potential applications of blockchain technology are numerous, and it's likely that there will continue to be new ways of adapting this technology to the mainstream business world in the future.
However, there is one important use of blockchain technology that exists outside its more traditional business applications: Some of the world's emerging economies are benefiting from the integration of blockchain technology in various ways. In diverse countries such as India, Kenya, and East Africa, blockchain technology has found uses in banking and financial services, supply chains, agriculture, and in managing land ownership records.
Among its many advantages (first and foremost being its ability to keep data secure), blockchain technology also claims to speed up and reduce the cost of transactions, and boost financial inclusion by providing more opportunities for those without easy access to financial services.
As of June 2023, CoinMarketCap reported over 25,000 different types of cryptocurrencies.
Challenges for Blockchain Implementation in Emerging Countries
Before we discuss opportunities, let's touch on why it may be particularly difficult for an emerging country to implement blockchain solutions. The hurdles below are not an exhaustive list but instead an overview of the unique challenges emerging countries must overcome.
- Infrastructure: The technological infrastructure in developing nations, such as access to the internet and reliable power sources, is frequently lacking. For safe communication and data transmission via blockchain, a strong and dependable network infrastructure is required.
- Education and Awareness: To deploy and use blockchain technology efficiently, one needs to have a particular level of technical knowledge. It may be difficult to recruit qualified individuals and develop local talent in many emerging nations due to a lack of knowledge and education on blockchain.
- Regulation: The regulatory environment for cryptocurrencies and blockchain differs greatly between nations. The use of blockchain technology may be hampered in developing nations by unclear or constrictive regulatory regimes.
- Financial Restraints: Implementing blockchain frequently necessitates a large outlay of funds, including expenditures associated with infrastructure setup, software development, and continuous maintenance. Allocating cash for blockchain initiatives may be difficult in emerging nations due to resource scarcity and budgetary restrictions.
- Adoption and Trust: The foundations of blockchain are decentralization and trust. There may be a lack of trust in digital technology or doubt about the advantages of blockchain in some emerging nations.
- Scalability: When it comes to managing a high volume of transactions, blockchain networks, particularly public blockchains like Bitcoin and Ethereum, experience scalability problems. This scalability issue may be especially important in developing nations where the population is expanding and there is a rising demand for digital services.
Banking Opportunities
In many parts of the world, individuals do not have easy access to banking services. With blockchain technology, users across the globe could access banking services where they otherwise wouldn't have the opportunity. Particularly, individuals inemerging economies where there are not standard banks readily accessible could make use of blockchain technology to access these services. One specific application is the use of blockchain for instant transfers of money between countries and without major fees and delay times.
Blockchain also offers a visible, impermeable ledger, protecting the accuracy of financial transactions. This may lessen instances of fraud, corruption, and other wrongdoing that frequently occur in the banking industry. Emerging nations can improve the security and dependability of their banking systems, boosting user confidence, by utilizing the immutability and transparency of the blockchain.
Last, access to credit is frequently restricted in emerging economies, especially for those without established credit histories. Blockchain can make it possible to develop decentralized credit scoring systems that use alternate data sources, including transaction records and payment histories, to evaluate creditworthiness. This could create opportunities for people and companies to receive loans and credit facilities based on their credit profiles created using blockchain technology.
In September 2021, El Salvador became the first country to make Bitcoin legal tender. In a study since, only 5% of all sales have been paid in bitcoin through the country's Chivo Wallet.
Examples of Blockchain in Emerging Countries
India
In India, ConsenSys Ventures, a blockchain software firm, has worked with the National Institution for Transforming India (NITI) Aayog, the Indian government’s policy think tank, on implementing blockchain in a land titling project. ConsenSys Ventures also signed an agreement with the Andhra Pradesh state government for an array of uses for its technology, including in land titling, supply chains, and health records.
Africa
In Kenya, IBM partnered with Twiga Foods, a business-to-business logistics platform for kiosks and food stalls across Africa, to extend micro-finance loans to vendors. These loans were intended to help vendors buy and manage more inventory. IBM's contribution was to build a blockchain-enabled lending platform that could determine the creditworthiness of the food vendors.
In Nigeria, blockchain technology has been used to monitor toxin levels along the River Niger, where efforts are underway to clean up the river belt. International organizations that are funding these projects rely on this data as part of their reporting requirements.
Haiti
Haiti, the victim of hurricane and earthquake damage caused over the last decade, also stands to benefit from blockchain.
The Haitian government has suggested that blockchain technology could be used to record and register property transactions, voting, intellectual property,and other aspects of bureaucracy. In 2019, theLa Banque de la République d’Haïti announced that it was considering a pilot program utilizing blockchain technology to create a digital version of the Haitian Gourde. The goal of this project would be to improve the domestic payments system and promote financial inclusion in Haiti.
Over the past few years, the Business Development and Investment (BDI) project in Haiti has helped thousands of producers. The BDI project was designed to support the reconstruction efforts after Haiti's 2010 earthquake, but was forced to redouble its efforts due to natural disasters, the COVID-19 pandemic, assassination of its President, lockdown due to socio-political unrest, and gang-fueled insecurity.
The project aimed to attract private sector investment through the creation of special industrial zones but later shifted to facilitating the export of existing high-quality agricultural products. To enable farmers to obtain higher prices, the project helped develop the capacity of third-party service providers, providing them with standard operating procedures, access to quality transport and logistics services, and supplying them with working capital. The entire project hinged on a blockchain solution for traceability and payments was developed, allowing direct payments to farmers.
The Future of Blockchain Technology in Emerging Economies
ForPaul Domjan, former global head of research, analytics,and data at investment bank Tellimer (formerly Exotix), emerging nations are the most promising beneficiaries of blockchain tech. He argues that, because "frontier markets in Latin America, Sub-Saharan Africa, and South Asia lag far behind [in the area of ownership recording], with average performance less than half that of the best-performing economies," they are primed for the benefits of blockchain.
Amnesty International program director Mark Dummett has voiced cautious support for the integration of blockchain into efforts to address these and other problems plaguing developing nations, saying, "You have to be wary of technological solutions to problems that are also political and economic, but blockchain may help. We're not against it."
How Can Blockchain Technology Contribute to Reducing Corruption in Emerging Countries?
Blockchain technology can contribute to reducing corruption in emerging countries by providing transparent and tamper-proof systems. It can enable decentralized and verifiable record-keeping, making it difficult for corrupt practices to go unnoticed. For example, blockchain-based land registries can reduce land-related corruption by securely recording property ownership and transactions.
What Are the Challenges and Opportunities of Implementing Blockchain Technology in Emerging Countries?
Challenges of implementing blockchain technology in emerging countries include limited internet connectivity, lack of technical expertise, and regulatory uncertainties. Collaborative efforts involving governments, private sector entities, and international organizations are essential for successful implementation.
How Can Blockchain Enhance Transparency in Public Procurement Processes in Emerging Countries?
Blockchain can enhance transparency in public procurement processes in emerging countries by recording every stage of the procurement lifecycle, ensuring integrity, and reducing the risk of fraud. Smart contracts can automate and enforce compliance with procurement rules, and decentralized platforms can enable real-time monitoring and verification of transactions, promoting fair competition and accountability.
What Are the Potential Risks and Challenges of Widespread Blockchain Adoption in Emerging Countries?
Potential risks and challenges of widespread blockchain adoption in emerging countries include regulatory uncertainties, scalability issues, cybersecurity threats, and the digital divide. Addressing these challenges requires establishing supportive regulatory frameworks, investing in infrastructure, and promoting digital literacy.
The Bottom Line
Besides the applications listed above, supporters of blockchain believe that it could enhance the distribution of government services in these nations, help to provide identity services,and even help to enhance freedom of speech and anti-corruption activities as well.
