Will Blockchain Make Poverty Obsolete?
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Why is it that capitalism seems to work so well in Western countries and fails the majority of the world that is living in poverty? According to the economist Hernando de Soto, the answer lies in something that he calls “dead capital” – assets without proof and liquidity.
Developing countries struggle to establish efficient property ownership frameworks. However, blockchain offers a revolutionary solution that can tackle this issue and have an everlasting social impact.
The Root of Poverty Lies in Dead Capital
As Hernando de Soto wisely laid out in “The Mystery of Capital,” five-sixths of the world is poor, despite that fact that the people in underserved parts of the world own houses, land, crops, and businesses, just as those in the western capitalist nations do. However, there is one major difference: all of their assets are not participating in the economy, so these assets are “dead capital.” It means that they do not have deeds or anything that represents proof of ownership and incorporation. Hence, the poor cannot even use their extralegal properties. Their properties represent “invisible potential,” because no one can verify who owns what.
Without property laws in place, we can’t transfer ownership, verify owners, divide ownership into shares, buy rights over properties, force people to pay debts, or enter some formal businesses. It is one big mess, but it is one that blockchain implementation is solving. The Internet is known as the protocol to transfer information, and blockchain is the best protocol to transfer value and digital assets; both are changing society.
How Land Registry on the Blockchain Can Create a Massive Social Impact
Land/title registry on the blockchain can create a massive social impact. Silicon Valley-based Zoom investor and BitFury Board Director Bill Tai stated, “In developing markets where there may NOT be 100% clarity on who owns what, access to capital is hindered. Blockchain provides a solution that brings clarity to title and thus access to capital.” As of now, land registries are already working on public blockchains (Vermont) and private blockchains (Dubai, Georgia).
According to a “Blockchain for Social Impact” study carried out by Stanford University and Ripple Works (Doug Galen et al.), the “leading use cases for blockchain are records and verification (26%) and payments and money transfers (25%).” With blockchain helping to verify property rights for a given individual, the opportunities for social impact vastly expand. For example, registered property rights mean that one can gain access to new forms of collateral, credit, or other indicators of a financial position. Additionally, foreign investment (in connection to registered property rights) attracts large amounts of capital each year.
Even more, registered property rights can create new jobs. New businesses established and financed in connection with registered properties will become available, and people can work in these businesses. Further employment opportunities come with the various activities associated with registered property rights. With job creation, there is a heightened lifestyle that creates healthier families, education, culture, and more.
Social Impact Through Blockchain Coming Soon
We are still in the early stages of blockchain initiatives that are dedicated to societal improvements. However, in the “Blockchain for Social Impact” analysis of 193 initiatives, projects, and organizations using blockchain to drive social impact, over half of the social-good blockchain initiatives were estimated to impact beneficiaries by the end of 2018. Many are still wondering if this is a major turning point for the history-making technology or if this is just another tech hype that will soon die. Currently, all signs are pointing to the former rather than the latter.