Byline: Hannah Parker
The next significant technological advancement of the decade will likely be blockchain technology. The growth of the cryptocurrency market and the value it represents have drawn the attention of traditional investors to this ground-breaking technology. Blockchain, though, may be used for much more than merely storing cryptocurrency.
The decentralised ledger on which it is based offers several benefits to nations with ailing economies. We’ll examine a few of these advantages and how they can aid developing nations in stabilising their economies. We’ll also examine several instances where blockchain has been used to combat inflation and provide people with a superior financial system to the one currently in use.
“Decentralised” means that a single entity cannot control a blockchain network. It is governed by appropriate consensus achieved by thousands of participants and validators. As a result, neither a government nor a central bank can abruptly alter the payment network’s operation. “Permissionless” means no one can impose restrictions on who can use blockchain services. Anyone, anywhere in the world, can utilise these networks without restrictions. Because all that is required is an internet connection and wallet software, the technology is remarkably impervious to censorship.
Why Developing Countries are Embracing Blockchain
Cryptocurrency helps the unbanked. People with little to no access to a reliable banking system can use various free financial services. Blockchain gives consumers access to quick and inexpensive electronic cash for everyday purchases, making it much easier for them to participate in their local economy. Additionally, they can access cutting-edge financial tools like lending and borrowing to generate passive income or quickly get a line of credit via the expanding decentralised finance (DeFi) ecosystem.
Another reason many developing countries embrace blockchain is that it helps keep inflation combated. Cryptocurrencies are deflationary since they have a finite maximum supply, like Bitcoin. The use of cryptocurrencies can help people maintain their wealth while preserving it in a liquid, transportable form and combat hyperinflation in some developing nations.
Corruption can be fought thanks to the digital ledger’s immutability. In many developing countries, corruption is pervasive. Extreme poverty and corruption influence each other, particularly in political institutions. All records and archives can be converted to digital format with blockchain, increasing administrative procedures’ transparency. Election rigging can be prevented through the use of voting on the blockchain.
According to the Bitcoin 360 AI review, assets made on the blockchain are entirely under the hands of individuals. No third party, such as a bank, has the authority to revoke or seize a person’s access to their money. Because the network is secured by asymmetric cryptography, each user still wholly owns their money.
Image by Gerd Altmann from Pixabay
Case Studies From Developing Countries
The ability of cryptocurrencies to elevate emerging nations’ economic and social stature makes them hugely beneficial. Due to the development of blockchain technologies, entrepreneurs have more control and much easier access to financing. Everything in Blockchain helps to increase economic activity in developing countries.
In nations where the local currency is facing hyperinflation, Bitcoin is widely used. The corrupt, old monetary system is being replaced by cryptocurrencies in a number of nations, including Nigeria, Argentina, and Turkey.
In Turkey, the government imposed strict rules that forbade the use of cryptocurrencies as a medium of exchange in response to the surge in popularity of cryptocurrencies and crypto exchange platforms.
The situation is entirely different in South America. Numerous countries are already considering the possibility of fully embracing cryptocurrency in order to support their flagging economies and currencies. By the end of 2022, according to Alex Hoeptner, the CEO of Bitmex, at least five more nations will recognise bitcoin as legal cash.
El Salvador started to accept bitcoin as legal tender in September 2021. This means that bitcoin can be used for regular transactions across the nation, and businesses can decide whether to take bitcoin or U.S. dollars as payment.
More crucially, people may use bitcoin to pay for nearly anything from bank loans, using it as collateral, and to store money. The Lighting Network and the Chivo wallet were implemented to make this possible. El Salvador’s government collaborated with Strike and other Bitcoin payment service providers to deliver nearly instantaneous transactions for its citizens because Bitcoin’s network is too slow.
The adoption of blockchain technology is well underway, with several businesses beginning to use it to enhance their operational procedures. This technology has significantly impacted the financial sector in poorer nations. People use cryptocurrencies to protect themselves against hyperinflation and use crypto exchange platforms to make value speculations. The cryptocurrency market should become considerably more stable as institutional interest in blockchain increases. The primary barrier to adopting Blockchain technology in poorer countries is volatility. As volatility declines over time, more nations may decide to use digital currencies as a tool to combat inflation.
