In a single decade, blockchain technology has taken the world by storm. It spawned a cryptocurrency industry that’s worth more than $115 billion today. It led to new ways for companies to find funding, new ways to communicate, new ways to transfer money, new ways to vote, and more. But most importantly, blockchain technology represented an ideology that was different from anything we’d seen before. A society where people wouldn’t have to trust intermediaries, a society that’s incorruptible, a society where people take back control over what they rightfully own.
While this new ideology might sound promising for blockchain enthusiasts, most people in Western countries don’t seem to be so excited about it. They are skeptical of blockchain technology and cryptocurrencies. The crypto winter of 2018 saw many gleeful told-you-so articles in newspapers from people who were hardly involved in the industry, as if the promise of a trustless, incorruptible society would be such a bad thing to have. It seems as if a certain apathy hangs over the vast majority of people in the West about blockchain technology.
This is understandable. After all, anything that’s new brings about a certain level of discomfort. Most people want to avoid this discomfort, and this is particularly the case in Western civilizations, where the merits of the new ideology that blockchain technology brings doesn’t seem to make such a big improvement over the society they already live in. After all, most of the time, their governments and banks can be trusted. The justice system works and things are done in a relatively fair way.
However, the story is different for developing countries. Blockchain adoption has risen in a few developing countries, and it should come as no surprise that this hasn’t happened because of ideology. It happened for a much more practical reason, which only exemplifies the strength of blockchain technology.
Take Venezuela. The country is in a deep political, economic, and monetary crisis. The International Monetary Fund estimated that Venezuela’s inflation rate in 2018 was a staggering 1.3 million percent. In 2019, this could skyrocket to ten million percent. The Venezuelan Bolivar (VEF) is losing value at such a rapid rate that companies have to at least double their prices every few weeks, if not days. In August of last year, president Nicolas Maduro knocked five zeros off the currency’s value to stop the country’s hyperinflation, but to no avail.
As a result, Venezuelans en masse have turned to cryptocurrencies. More specifically, they use local crypto exchanges such as LocalBitcoins to buy Bitcoin, Dash, or Zcash. Exchanging their VEF for cryptocurrencies helps Venezuelans avoid hyperinflation, as well as the country’s strict financial controls.
For example: the Venezuelan government, suffering from dwindling money reserves, is taking an increasingly larger bite from the remittances sent to people in Venezuela from abroad. This fee can sometimes be multiple double digits. To avoid this government fee altogether, people send their relatives in Venezuela cryptocurrencies, where fees are minimal and where transfers happen in at most a few minutes, instead of the weeks it would otherwise take.
Dash in particular has grown popular in Venezuela. It ranks #15 on CoinMarketCap and its CEO told Business Insider last year that Venezuela was the second biggest market for them, after the United States. Dash has actively marketed itself in Venezuela and has educated Venezuelans on how they can use Dash to pay for daily life or to store their savings. Dash differs from Bitcoin in that it is cheaper and much faster to transfer money.
Zcash is popular too. What’s unique about Zcash is that it grants complete anonymity. In a country like Venezuela, this is helpful. After all, the government would prefer Venezuelans to either not use cryptocurrencies at all or use their recently-introduced, state-controlled cryptocurrency Petro. As such, dealing in other cryptocurrencies comes with a certain risk. Just like physical cash, Zcash offers a layer of anonymity that can protect Venezuelans if the government were to track down people who put their money in crypto.
Venezuela isn’t the only developing country where cryptocurrencies are seeing spectacular adoption. Zimbabwe is seeing the same trend. Over the last two decades, the landlocked country has been in a severe monetary crisis, with inflation rates reaching double-digit septillion percentages, a number so big it defies understanding and should really only be used in astronomy. At one point, 100 trillion Zimbabwean dollars amounted to $0.40. The currency was abandoned in 2009, and Zimbabwe now uses a mix of different currencies, including the USD and the South African Rand.
This prolonged period of monetary crisis has led to an economy that’s almost entirely cashless. Zimbabweans use alternative payment platforms hosted on the Internet, such as EcoCash and OneMoney. In fact, Africa in general has leapfrogged Westernized nations when it comes to mobile. Instead of laying down copper cables, African countries immediately went for 3G networks instead. As such, while many Africans do not have access to banking, a large majority do have a mobile phone with a 3G connection.
It should come as no surprise that Zimbabweans turn to crypto just like Venezuelans do. Again, a local exchange such as LocalBitcoins helps many people convert their cash into a cryptocurrency that’s more stable and more trusted than the government or the central bank. Another platform that’s well-known in Zimbabwe is Study 263, a fintech startup from neighboring country South Africa that allows Zimbabweans to order food with different cryptocurrencies, but also allows foreign Zimbabwean students to pay their student fees abroad without having to worry about monetary instability.
Let’s look at Iran as a final example of a developing country whose population turns to crypto for reasons other than pure ideology. The Iranian rial had been falling dramatically because of sanctions imposed on the country. Those sanctions were lifted in 2016 when Iran reached an agreement with major powers on their nuclear program, but the US withdrew from that agreement under president Trump and reinstated their sanctions.
As such, and because of Iran’s economic mismanagement over the last decade, the rial has lost 60% of its value in 2018. Iran has a population of over 81 million, far more than Zimbabwe and Venezuela, which has led to a high number of Iranians using Bitcoin and other non-fiat crypto. This is not just to escape the rial dropping in value, but also to circumvent the sanctions imposed on the country. Iranian students abroad can’t open foreign bank accounts to send their money to, so they have no choice but to turn to alternatives. Again, LocalBitcoins is often the crypto exchange of choice.
Just like in Venezuela, the Iranian government has announced plans for its own crypto, to circumvent US sanctions. It’s rumored that the country is negotiating with the European Union and Russia to use this cryptocurrency to circumvent those sanctions, considering major powers in the EU haven’t stepped out of the Iran Nuclear Deal, but are tied to a world economy that’s denominated in USD.
Unfortunately, cryptocurrencies still aren’t easy enough to use. After all, many of the people living in regimes that could benefit from blockchain technology have little to zero tech know-how. Often, they’re not literate either. The blockchain industry should look at how Facebook has come to dominate the world. Facebook’s mobile app and its web app in developing countries are incredibly easy to navigate, even without knowing how to write, which explains its growing popularity in countries such as Afghanistan, where adult illiteracy is at 31%.
Alternatively, fintech crypto startups could look at some of the decentralized games currently available. An increasing number of DGames, from Steem Monsters to Axie Infinity are surprisingly simple and intuitive to play. This is in part because DGames still aren’t easy to scale and don’t allow for too much complexity yet, but also because games simply need to be intuitive if they want to attract a considerable audience. I would even go so far as to say that gamified DApp or website might well accelerate adoption of blockchain technology and cryptocurrencies in developing countries.
While the debate on whether democracy is the best form of government is outside of the scope of this article, democratic countries are on average far healthier, wealthier, and are better at respecting the human rights of their respective populations. And while the world has grown significantly more democratic over the last 200 years, vast chunks of the world’s population still live in authoritarian regimes with few rights and little access to anything but the very basics.
Think about the potential of blockchain technology for developing countries. While president Jinping of China can track all your transactions on AliPay and WePay, he cannot monitor cryptocurrency transactions. While president Putin can target any NGO and freeze their bank accounts, he cannot do so with cryptocurrency wallets. While refugees cannot access banks, they can likely access the Internet to receive crypto payments from charities.
Blockchain technology might have found some ideological enthusiasm in the West and Westernized countries, but the technology has already shown it can be helpful in a very practical way as well. The way forward for worldwide blockchain adoption may come through developing countries, and crypto startups would do well to at least consider gamifying their offering.