Bitcoin Fixes This: Developing Countries
This is the script for an animated video on the Bitcoin Stimulus YouTube Channel. Check out the video here.
In June of 2021, El Salvador made history as they became the first country to adopt Bitcoin as legal tender. While this move left many mainstream economists scratching their heads, from the perspective of a developing country, it makes perfect sense.
With the global economy growing increasingly digital, those who lack access to the online marketplace are being left behind. It is estimated that 31% of adults are unbanked, meaning in most cases, they do not have access to the financial tools required to take part in the global economy. In 2014 a poll was taken, asking unbanked adults why they are unbanked
Some of the reasons given include:
Lack of trust
Cannot get an account
Lack of necessary documentation
Financial institutions are too far away
I don’t have enough money
Simply speaking, Bitcoin fixes this.
Bitcoin relies on cryptographic proof; no trust is necessary.
Bitcoin is open to every person on earth with an internet connection.
Bitcoin does not require any personal information.
Bitcoin usage does not require financial institutions.
And Bitcoin wallets are free to set up.
As internet connectivity continues to spread, and the cost to produce smartphones continues to drop, it is only a matter of time before the entire developing world has mobile access to the internet.
With Bitcoin, being unbanked is no longer an issue. With a mobile device, an internet connection, and a free Bitcoin wallet, anyone has the power to be their own bank.
There are three main areas in which Bitcoin adoption will greatly improve the quality of life in developing countries
Many families in developing nations rely on remittances for survival. According to an Allied Market Research report, the global remittance industry was estimated at $680 billion in 2018. Of this $680 billion, $30 billion was eaten up in fees.
Imagine the impact that an extra $30 billion dollars could have on some of the poorest people in the world.
Not only is their money getting eaten up in fees, but for many people the closest money transfer service is many miles away from their home. Receiving the funds may require a full day’s worth of travel costing time and even more money. To top it off, in many countries money transfer institutions are often some of the most dangerous places as customers leaving the buildings are often targeted by gangs and thieves.
Bitcoin fixes this by
1. Removing the middlemen from the equation thereby lowering the cost and increasing the speed of transactions. Using Bitcoin over the Lightning Network reduces the cost to near zero, and delivers the transaction instantly.
2. By eliminating the need to travel long distances to receive the funds saving time and money
3. By offering a safe way for families to send money without any chance of it being intercepted by criminals
By tapping into a global, open monetary network, entrepreneurs and business owners from the developing world can greatly expand their clientele base. Software engineers, graphic designers, and virtual assistants can begin to offer their services anywhere on Earth including to wealthy countries who will pay generously for their services. This money can then be reinvested in the local economy spurring growth in other industries.
A major issue facing developing nations is what is referred to as ‘the brain drain’ or highly skilled workers leaving their home country in favor of a country with superior employment opportunities.
An emerging Bitcoin economy in cyberspace will allow many skilled workers in developing countries to remain home and virtually offer their services anywhere in the world, without the inefficiencies and fees of legacy financial institutions.
Saving and investing over time are required to build long lasting wealth. Unfortunately for many in the developing world, saving and investing are not viable options. Investing opportunities are limited, while the incentives for saving are just not there. Why save your money when you know it will buy you less food next year or next month due to inflation?
Bitcoin’s incentive structure rewards savers rather than punishing them. Despite its volatility, holding bitcoin for
1 year has been profitable 80% of the time
2 years has been profitable 90% of the time
3 years has been profitable 97% of the time
4+ years has been profitable 100% of the time
From a long-term perspective, Bitcoin’s volatility is irrelevant.
This can be contrasted to fiat currencies in the developing world which promise at least a small loss of purchasing power each year
By utilizing Bitcoin, money that rewards saving, citizens in the developing world will finally be able to lay the groundwork for building generational wealth.
There are many difficult issues facing developing countries throughout the world. The adoption of Bitcoin is by no means an overnight fix. But by embracing this emerging technology, the developing world has a golden opportunity to set the stage for a brighter financial future.
Thanks for reading!