Blockchain and Cryptocurrencies Offer Hope in a Volatile World
While price volatility is one of the most notable qualities of nascent cryptocurrencies, mainstream media and regulatory bodies tend to overemphasise the financial and security risks of decentralised blockchain-based digital assets, like Bitcoin and Ethereum.
What they have often overlooked is crypto’s role in the volatile side of the world, in which political and economic stability are privileges that are not inherited by the people living there.
Even among people in developed countries are those who cannot enjoy the same financial services offered to the rest of the population.
Many people forget how volatile the world can be, and how unwise it is to dismiss decentralised finance entirely, in favour of the familiar, legacy financial and legal infrastructures.
Blockchain technology is used to preserve ideas
In Hong Kong, some protestors of the Chinese Communist Party are preserving content and articles written for the pro-democracy tabloid Apple Daily on a decentralised file-storage network called ARWeave.
Being decentralised means that the network doesn’t have one center or server in a particular location. Instead, ARWeave is supported by hundreds of running computers across the world, introducing multiple layers of redundancy, ensuring that stored files cannot be corrupted or censored.
Beijing’s National Security Law, effective in June 2020, has targeted many media firms who hold anti-government views for more than a year now. On 17 June, Hong Kong police seized control of Apple Daily and had frozen its assets. With the last newspaper issued on 24 June and the editors arrested, millions of Hong Kong citizens worry about the fate of their freedom of speech.
Mass media control has existed for as long as writing has been invented. Efforts such as the banning of forums, book burning, censoring news outlets and taking down websites have been successful in dissolving communication between people with opposing views.
However, this shows that with the introduction of blockchain-based decentralised networks, free speech can have the upper hand against media censorship, especially due to an authoritarian government.
Cryptocurrencies can bypass unfair remittance systems
The conventional financial infrastructure is not inclusive. After all, banks and other financial services are businesses, and businesses can’t support everyone’s needs. The current remittance system is an ironic example of a business model that seeks to help migrant workers while charging an often exuberant amount of fees.
There is a string of middlemen, whose job is to connect the gaps in banking networks. Even small inefficiencies among several banking networks can add up to a high cost of transacting. This cost is paid by people whose intentions are to support their family back home, with some of the world’s lowest salaries.
According to a report, the cost of remittances in sub-Saharan Africa is among the highest in the world. “The cost of diaspora remittances from Tanzania to Kenya and Uganda was among the highest in Africa in the past year, averaging between 17 percent and 21 percent per $200.”
Looking at the average remittance cost of the region gives the figure of 8.17% (Q4 2020), which is still almost twice as high as the average of 4.9 percent in South Asia, and the latter region is made up of fewer countries.
However, cryptocurrencies have alleviated some of the pains of sending money abroad. Despite a tough cryptocurrency ban in Nigeria, remittances through official platforms have fallen by $6 billion, reports The Africa Report. The Nigerian Central Bank seems to think that Nigerians have switched to cryptocurrencies to do the same task more efficiently.
Crypto-powered remittances also thrive in Latin America, as this CoinDesk author recounts his experience with using various exchanges, peer-to-peer Bitcoin marketplaces, and even an informal Whatsapp group of cryptocurrency merchants and agents.
Cryptocurrencies preserve wealth when traditional banks cannot
Financial crises can even happen to countries with well-established financial regulations. To name a few — the 2008 subprime mortgage crisis in the US, the 2009 sovereign debt crisis in the EU, the 2014 Russian and 2015 Chinese stock market crises.
These crises often reverberate across the world, but other lesser known shortfall events continue to happen in other countries throughout the decade — Turkey, Argentina, Venezuela, etc.
The most recent Lebanese economic crisis caused the value of the local currency to plummet, while bank deposits are locked into oblivion due to the central bank’s mismanagement of the nation’s debt. It’s no wonder that the Lebanese have turned to cryptocurrency for financial freedom.
In war-torn Afghanistan, cryptocurrencies are playing a pivotal role in giving victimised Afghans some hope of rebuilding their wealth after they settle in a much safer location. For many Afghans, running out of cash is one of the biggest threats to their lives, after the Taliban.
There is absolutely no centralised financial service available in Afghanistan right now, despite them holding many people’s life savings, which can literally save lives.
According to CNBC, “…even the centuries-old “hawala” system – which facilitates cross-border transactions via a sophisticated network of money exchangers and personal contacts – for now, remains closed.”
Cryptocurrency is more than an asset class
In highly developed countries, it can be difficult to imagine what else can cryptocurrencies be apart from becoming a new asset class for savvy traders and investors. For many people, cryptocurrency is life.
- In critical situations, it is a store of value that doesn’t attract attention. Transacting digital currency with a stranger, especially with a smart contract, is fast and subtle, as opposed to using gold.
- Crypto wallets are banks that can never close, and crypto networks are cost-effective and reliable media to send remittances anywhere to anyone.
- Information and education that preserves the value of human rights can be protected on the blockchain, forever immutable and open for all to see.
Regulators should see that decentralised finance will not be a replacement for the legacy financial system. Rather, it backs up the system, in situations where no government can guarantee the safety of its people’s wealth.