Something strange is happening to Bitcoin. Once viewed as a way to do business in the darkest corners of the web, the digital currency has rather suddenly become a favorite talking point among humanitarians and international development enthusiasts.
Bitcoin isn’t just for illicit transactions or Internet hobbyists anymore, but for helping the poor, the downtrodden, and the unbanked.
Perhaps Bitcoin can save them! Perhaps Bitcoin can save the world!
Regardless of whether this attitude is realistic—and more on that in a minute—the people focused on demonstrating the social benefits of Bitcoin are challenging existing narratives about the cryptocurrency. While early commentary focused on how Bitcoin might be used to buy drugs online, or for sending money without a paper trail; the social-good argument suggests that these uses were simply the first use-cases in which Bitcoin’s utility became apparent. But there are billions of other potential use. There are, for example, people who face significant obstacles in operating within the formal banking system—and these folks look very different from the shadowy hackers that tend to be seen as the prototypical Bitcoin user. They could be low-wage migrant workers sending money back home to their families, for example, or activists receiving money from abroad during tumultuous times.
Bitcoin do-gooders also propose the idea of using a blockchain to register and record property titles in countries with tenuous land-rights protections. Instead of using paper-based processes, the blockchain would enable the government to register digital titles that cannot be duplicated or easily changed. Which would mean greater accountability for official records.
Think about it this way: Most of the value in developing world communities is locked “dead capital,” or property that cannot be leveraged as collateral for loans or long-term contracts, because ownership of the property is not easily verifiable with a title or deed. In other words, even if someone owns property, that person may not be able to prove ownership sufficiently enough to gain access to money for future long-term investments.
That’s according to the development economist Hernando de Soto, who proposes fixing this problem by registering digital versions of property titles into a distributed blockchain like Bitcoin. By being entered into the blockchain, there would be an immutable record of title that could not be easily tampered with or destroyed.
At first glance, this seems like a great idea. But using the blockchain to “solve” land-title problems rests on a shallow, incomplete understanding of the challenge at hand. The complexities of how land titles are managed in developing countries is the result of long-standing conflicts between grassroots communities, their governments, and large multinational corporations. By assuming the problem is mainly about bureaucratic inefficiencies and paper-based processes, Bitcoin enthusiasts ignore the hardest part of the situation: long-standing conflicts over rights and power. Sadly, the focus on documentation via blockchain overlooks the key insights we can learn from de Soto’s work: that land rights struggles are a high-touch, long-term issue.
Yet the allure of blockchain as silver bullet is powerful. The writer Courtney Martin aptly describes the tendency to embrace such narratives as the “reductive seduction of other people’s problems,” whereby the bright-eyed American idealist feels capable of solving intricate problems with one-dimensional solutions. As difficult as it is can be for Americans to grasp the full complexity of systemic inequality in their own backyards, Martin argues, it’s much more challenging for Americans to understand the full complexity of problems in places far removed from their daily lives. The idea that blockchain could be a transformative tool for social change underscores this same problem: People often don’t take the time to understand the problems they’re trying to solve, because they believe they already know the solution.
Blockchain enthusiasts like to give the example of a poor farmer or a low-wage migrant worker receiving a low-cost money transfer from a loved one far away. And the cost of money transfer is a real issue. Sub-Saharan Africa remains the most expensive region in the world to send money to, with average fees in the range of 9 percent to 10 percent, according to the World Bank. But Bitcoin wouldn’t necessarily make transactions cheaper. The price of transacting over Bitcoin depends on how much demand there is to use the network at a given time. While the number of transactions over Bitcoin has been steadily rising over the last few years, the processing capacity of the network (that is, the volume of transactions that can be processed per second) has remained static. What that means: If transaction volumes continue to grow without a commensurate increase in processing capacity, then transaction fees are likely to climb well above the cost of credit cards or bank transfers.
On top of that, wait times for those transactions to be fully processed have become increasingly erratic, causing a record number of complaints from customers trying to pay with Bitcoin.
Bitcoin isn’t just for illicit transactions or Internet hobbyists anymore, but for helping the poor, the downtrodden, and the unbanked.
Perhaps Bitcoin can save them! Perhaps Bitcoin can save the world!
Regardless of whether this attitude is realistic—and more on that in a minute—the people focused on demonstrating the social benefits of Bitcoin are challenging existing narratives about the cryptocurrency. While early commentary focused on how Bitcoin might be used to buy drugs online, or for sending money without a paper trail; the social-good argument suggests that these uses were simply the first use-cases in which Bitcoin’s utility became apparent. But there are billions of other potential use. There are, for example, people who face significant obstacles in operating within the formal banking system—and these folks look very different from the shadowy hackers that tend to be seen as the prototypical Bitcoin user. They could be low-wage migrant workers sending money back home to their families, for example, or activists receiving money from abroad during tumultuous times.
Bitcoin do-gooders also propose the idea of using a blockchain to register and record property titles in countries with tenuous land-rights protections. Instead of using paper-based processes, the blockchain would enable the government to register digital titles that cannot be duplicated or easily changed. Which would mean greater accountability for official records.
Think about it this way: Most of the value in developing world communities is locked “dead capital,” or property that cannot be leveraged as collateral for loans or long-term contracts, because ownership of the property is not easily verifiable with a title or deed. In other words, even if someone owns property, that person may not be able to prove ownership sufficiently enough to gain access to money for future long-term investments.
That’s according to the development economist Hernando de Soto, who proposes fixing this problem by registering digital versions of property titles into a distributed blockchain like Bitcoin. By being entered into the blockchain, there would be an immutable record of title that could not be easily tampered with or destroyed.
At first glance, this seems like a great idea. But using the blockchain to “solve” land-title problems rests on a shallow, incomplete understanding of the challenge at hand. The complexities of how land titles are managed in developing countries is the result of long-standing conflicts between grassroots communities, their governments, and large multinational corporations. By assuming the problem is mainly about bureaucratic inefficiencies and paper-based processes, Bitcoin enthusiasts ignore the hardest part of the situation: long-standing conflicts over rights and power. Sadly, the focus on documentation via blockchain overlooks the key insights we can learn from de Soto’s work: that land rights struggles are a high-touch, long-term issue.
Yet the allure of blockchain as silver bullet is powerful. The writer Courtney Martin aptly describes the tendency to embrace such narratives as the “reductive seduction of other people’s problems,” whereby the bright-eyed American idealist feels capable of solving intricate problems with one-dimensional solutions. As difficult as it is can be for Americans to grasp the full complexity of systemic inequality in their own backyards, Martin argues, it’s much more challenging for Americans to understand the full complexity of problems in places far removed from their daily lives. The idea that blockchain could be a transformative tool for social change underscores this same problem: People often don’t take the time to understand the problems they’re trying to solve, because they believe they already know the solution.
Blockchain enthusiasts like to give the example of a poor farmer or a low-wage migrant worker receiving a low-cost money transfer from a loved one far away. And the cost of money transfer is a real issue. Sub-Saharan Africa remains the most expensive region in the world to send money to, with average fees in the range of 9 percent to 10 percent, according to the World Bank. But Bitcoin wouldn’t necessarily make transactions cheaper. The price of transacting over Bitcoin depends on how much demand there is to use the network at a given time. While the number of transactions over Bitcoin has been steadily rising over the last few years, the processing capacity of the network (that is, the volume of transactions that can be processed per second) has remained static. What that means: If transaction volumes continue to grow without a commensurate increase in processing capacity, then transaction fees are likely to climb well above the cost of credit cards or bank transfers.
On top of that, wait times for those transactions to be fully processed have become increasingly erratic, causing a record number of complaints from customers trying to pay with Bitcoin.
