Investment bank Exotix believes that blockchain technology will make the biggest difference in emerging countries.
Paul Domjan, who is the global head of research, analytics and data at the bank discussed that although this is likely to happen on a step by step basis, that certain technologies have the ability to skip steps, giving a solution to the problem much quicker than before. He used the rapid increase in smartphone usage as an example of this. In a developed country, the chances of having a fixed telephone line is pretty much a given; however, this simply is not the case in emerging countries. Yet, smartphones have given them the chance to experience the world from the comfort of their palm, effectively skipping the step of a fixed line.
He feels that blockchain could have the same effect. Despite being created to support cryptocurrencies, it also offers huge benefits to most industries. Domjan explained how this could work;
“Due to its distributed nature, recording new assets on a blockchain can be quite slow, with transaction times measured in hours or even days rather than the seconds that are typical of e-commerce. As such, blockchain technology is a poor substitute for existing ownership records in developed or even emerging economies…Whereas some emerging markets, such as Russia and China, have property registration systems on par with those in the high-income OECD countries, frontier markets in Latin America, Sub-Saharan Africa, and South Asia lag far behind, with average performance less than half that of the best performing economies.”
He is also quick to add though that it is not just the property sector that can benefit from blockchain technology. He also took time to discuss smart contracts and how they create an opportunity for developing countries to work more effectively, saying;
“The same principle can be used for transactions ranging from financial derivatives to international trade.”
Domjan believes that blockchain could be incredibly beneficial to developing nations, and could provide a viable alternative to fiat currencies, saying;
“In countries with capital controls, highly volatile currencies, and high inflation, the governance problems, payment transaction costs, and volatility of their domestic currency may seem worse than those of cryptocurrencies, or at least bad enough that cryptocurrencies represent an attractive hedge against their domestic currency. We see this advantage across the developing world, from foreign investors in Brazil looking to move money, to brokers in Zimbabwe looking for an alternative store of value.”
Image Source: Pixabay