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Thursday, December 14, 2017

Can Digital Currency Wipe Out World-Wide Corruption & Poverty?

“The future is already here. It’s just not very evenly distributed.” - William Gibson

 I often hear about all the alleged "criminal behavior" bitcoin supports. I think it's important to discuss bitcoin's potential to reduce criminal behavior as well.

In 2009, 53 police officers in Afghanistan were paid by a new mobile service called M-Paisa. This was a pilot program to see if public sector jobs could be paid with M-Paisa. When the officers received payment they also noticed a 30% pay raise. Perhaps this was compensation for participating in the pilot? No. This was the amount the officers should have been getting all along, but superior officers had been skimming off of salaries. M-Paisa payments made the police officers very happy, but the mayors, not so much. 

This is a micro example of what digital payment services can do to eliminate the middle-man and reduce corruption. Digital currencies have the same impact at the macro level. Here's a quote from an article in Forbes describing the impact of M-Pesa on Kenya's economy:

In Kenya, M-Pesa has been so successful that traditional banks have come to see it as a serious competitor.  At first, these banks sought to limit M-Pesa by seeking regulations from the Kenyan government, but increasingly they have begun to offer mobile banking services that attempt to disrupt M-Pesa’s monopoly of the mobile money market.

In other words, M-Pesa has gained so much traction that the government is worried because they are losing both power and money, but the end result is a more balanced economy.

To further support the theory, one study recently found that "increased access to mobile money has increased long-term consumption in Kenya and reduced the number of households in extreme poverty."  The study estimates that it lifted 2% of Kenyan households out of poverty, with the impact being more pronounced in female-headed households. Women using M-Pesa tended to move out of agriculture and into business (Science, p. 1288). Mobile Money, the study concludes:

...a service that allows monetary value to be stored on a mobile phone and sent to other Mobile money has therefore increased the efficiency of the allocation of consumption over time while allowing a more efficient allocation of labor, resulting in a meaningful reduction of poverty in Kenya.

Like toll-booths, intermediaries (banks, government, corporations) are there to collect some sort of tax or fee from us, but what happens when we can go from A to B without intermediaries?

Paradigm Shift: M-Pesa, M-Paisa, MCash, bKash and EasyPaisa

Today almost every household in Kenya uses M-Pesa. It allows anyone with a mobile phone to transfer money. It also has a financing and micro-financing service. Started in 2007 by the largest mobile network operators in Kenya and Tanzania, the operation later expanded to Afghanistan, South Africa, India, Romania and Albania.  

The growth of the M-Pesa market mirrors bitcoin. The mobile phone market overall has over 900 million subscribers in Africa and over 3.7 billion in Asia. M-Pesa isn't the only mobile payment service. There's also M-Paisa in Afghanistan, Smart in the Philippines, MCash and bKash in Bangladesh, and EasyPaisa in Pakistan (2009).  According to the Global Mobile Systems Association (GMSA) there are now 277 live services across 92 markets (two-thirds of which are low- and middle-income countries). The report goes on to say that:

Registered accounts grew nearly six-fold in the last five years to more than half a billion in 2016, helped by a growing network of mobile money agents. In 2016, there were more than 4.3 million registered agent outlets, of which 2.3 million were active on a monthly basis; thirty countries now have ten times more active agents than bank branches, bringing mobile money within reach of millions of unbanked households.

So what can these experiments tell us about what we can expect will happen in the United States with more widespread use of bitcoin?

Poverty & Digital Currency

Bitcoin is much more than just a digital currency (for more on what bitcoin is, please click here). Likewise, M-Pesa is more than a cell phone service. The two have much in common, most importantly they cut out the middle-man which is impacting global economics at the micro- and macro-level.  

Scientists are attributing M-Pesa with lifting people out of poverty, which is something the U.N. is shining a spotlight on. In fact, the U.N. Special Rapporteur on extreme poverty and human rights has written a report about extreme poverty in America. 

It's hard to imagine that anyone in the United States, the richest country in the world, could be living in extreme poverty, but in Alabama 19 of 55 individuals tested positive for hookworm, a disease which was thought to have been eradicated in the U.S. by the 1980s. Hookworm tends to thrive in regions of extreme poverty with poor sanitation and it is thriving in certain parts of America as well. 

The only way for the richest country in the world to be home to conditions of extreme poverty is for rampant corruption to exist. The best place to put our collective energy (literally) is not in the hands of a new set of men and women to be corrupted by the 1% every four years, but in bitcoin and other related digital currencies in use around the world (for an example of what blockchain and bitcoin can do, take a look at what Estonia is doing here)

Final Thoughts: Transfer of Wealth

We are witnessing the largest transfer of wealth in modern history. The police officer example above is only a glimpse at the potential we stand to recoup. The current system is a zero-sum game, so what the uber-wealthy lose will not be lost, but transferred to its rightful owners through bitcoin and other digital currencies. All the money that used to go to bribes, government corruption and banks is now working its way back into the hands of "the people" which is reducing poverty worldwide.

Kenya's government couldn't shut M-Pesa down. Likewise, if the US government could forbid the use of bitcoin, it would have done so already. Bitcoin is more than voting with your dollars, it's investing in a new world order that brings all these payment systems together. You can even buy bitcoin with M-Pesa using LocalBitcoins, a peer-to-peer bitcoin exchange network.

Bitcoin has no nationality. It has no history of debt or corruption. It has no spoken language. It has no borders. It has no tribe. It is incapable of war. It is intangible in nature. And, best of all, it requires no assistance from corruptible minds. It is in the process of accumulating wealth from national currencies (G5). This is why the price of bitcoin will continue to rise with the fall of the dollar, pound, yen and euro.