Developing countries are often mentioned when it comes to use cases for decentralized finance ( DeFi ) or cryptocurrencies like Bitcoin . However, there is a big difference between the theories and what actually happened.
Developing countries often turn out to be locations with impressive innovation potential. Be it because there is a great need for improvement or because of the huge pool of talent that is often present in these countries.
Research shows that the Middle East, Africa and Asia are among the fastest growing economic areas. Not only micro-companies are involved, but particularly large technology companies that want to assert themselves on an international level. It's no different with blockchain and cryptocurrencies. And just developing countries often provide many applications for these technologies.
Many people in the US and Europe see Bitcoin as the next global currency. In contrast, communities in Africa, Asia and Latin America have already introduced their own tokens.
When it comes to crypto adoption, developing countries are way ahead. A survey by Statista from 2020 shows that low- and middle-income countries are much more likely to invest in and hold cryptocurrencies. In Nigeria , for example, 34% of respondents said they own or use cryptocurrencies, in the Philippines it was 20% . In comparison, Germany and Japan are only 5% and 4% respectively.
What the developing countries need
In developing countries, the focus is on general growth. Because they are expected to grow to meet "first world" standards. However, what many developing countries lack is access to capital. This is often simply due to high unemployment. But even those in work often cannot easily access, distribute or spend their money. This could be due to volatile local currencies , a lack of industry in smaller cities or rural areas, or regional instability .
“Blockchain technology can solve relevant, local problems in developing countries. And the existing framework conditions can accelerate the implementation of these improvements, ”says Johannes Schweifer , co-founder and CEO of CoreLedger . From a regulatory point of view, this is already evident. While the United States has been going round in circles regulating crypto and blockchain, El Salvador has since adopted Bitcoin as legal tender .
Although this is an extreme case, the search for solutions beyond previously failed institutions is also of interest to developing countries. This is made clear by the criticism of the IMF and the World Bank , especially in countries where the loans taken out only put an additional burden on citizens. In Kenya, for example, there were protests against an IMF loan because the funds were often embezzled by corrupt politicians.
Without these large donors, however, communities will have to find alternative sources of liquidity . This is where cryptocurrencies come into play .
Funding of already existing projects
When it comes to projects on the blockchain, it is primarily local start-ups that are innovative. Even without large financial injections from international corporations, the crypto community often manages to support projects independently. Either through technological support, educational work or fundraising.
One example of this is the CoreLedger funding program. It aims to support tokenization projects. The company has already had success in Argentina. There, farmers tokenize their soybeans with the Agrotoken in order to expand liquidity and the sales market.
“A few years ago, the focus of blockchain technology was on its revolutionary potential. The most popular topics of this change were so-called impact initiatives. That means the financial inclusion of people without bank details, the provision of digital identity options for migrants and of course the opening of the local economy to the world. Much of the public interest has moved away from these types of solutions and into speculation. However, we still believe that blockchain technology can do a lot of good, ”says Schweifer.
This is exactly where CoreLedger wants to invest. With local people who need support to develop projects and support communities and economies. The participants in the program can test their use cases through a simulation in a sandbox . This ensures that they actually work and are not just speculative.
Another example of a similar local project is the Finka Token . He supports ranchers in Bolivia in tokenizing their assets. In this case it's cows. Regional and external investors can get involved and support the farmers by buying the token. All of this happens on the blockchain.
Bitcoin and the township economy in South Africa
However, not all projects directly support each other. Some just add new ideas. This is the case in South Africa, where a project is promoting the use and adoption of Bitcoin in the townships . Hermann Vivier was inspired by the Bitcoin Beach project in El Salvador. He then introduced Bitcoin to surf schools that work as part of his non-profit, The Surfer Kids . Hermann Vivier explains:
“I spent June, July and August 2021 training the surf instructors on all aspects of Bitcoin . They were now working on getting shops in the township on board that would accept Bitcoin as a method of payment for groceries. "
“We started paying the Surfer Kids coaches a small part of their salaries in Bitcoin . They then spent that part on buying groceries from the township store, ”added Vivier.
So far, the project called Bitcoin Ekasi has involved three stores where the trainers spend their BTC. For Vivier, Bitcoin offers people in low-income regions the opportunity to save, invest and overcome entrenched views and prejudices about finances.
“One of the most important lessons from the Bitcoin Beach project is the realization that it is a mistake to think that poor people are not interested in saving. The reality is that low-income people simply have never had easy access to an efficient form of saving, ”says Vivier.
Fiat money is a melting ice cube. Even if you don't know what inflation is or where it's coming from, nowhere is the impact more felt than in communities where people live hand-to-mouth. From day to day, from check to check.
Strengthen the local economy through common currencies
This idea of “ melting fiat ” can be observed in many countries. A look at Kenya shows that the Kenyan shilling is not extremely volatile, but has nevertheless lost value. In addition, it is difficult to access cash and save, especially in rural areas.
This is where the Grassroots Economics project wants to help and strengthen the local economy through community currencies.
While these currencies are not based on the blockchain, they provide the same type of support that other crypto projects are working towards.
The aim is to protect communities from lack of money and to stimulate trade and investment. As a result, people could build businesses and pay for goods and services. This also brings with it a higher level of market stability.
Why we should pay more attention to developing countries
Europe, the US and China may be making headlines with their crypto news, but a lot of it is related to the current ebb and flow of the market. In developing countries, the use of new technologies is often of practical use. For example, cross-border remittances from migrants to lower-income countries are used to a much greater extent than in the “developed” world.
“In our experience, there are also many creative, practical applications for blockchain technology in developing countries that go beyond speculation,” says Schweifer. “We believe that blockchain technology will be an integral part of the way we do business in an increasingly digital and globalized world. Developing countries will also benefit greatly from the technology and know-how. "
In addition, these economies are looking for ways to catch up with the current capital superpowers. And the old industries are proving of little help in taking lower and middle income economies to the next level. However, these new technologies and financial processes could be the next "industrial revolution".
“Blockchain solutions, cryptocurrencies and DeFi often find it difficult to enforce in the“ developed ”countries due to politics and old regulations. In developing countries, however, these solutions have the chance to take a leap forward. For anyone who recognizes the possibilities of this technology, it is obvious to support these initiatives in such a way that they can have a real impact, ”says Schweifer.
The risk of big technology promises
Even if a lot of innovations and improvements are currently under discussion, new technologies do not always have to be the solution. After all, tokenization of assets for a community may seem valuable, but it also cannot work as hoped if not all factors are taken into account.
Indeed, without considering the socio-economic factors that play a role in any setting, technology will not help those whom it is ultimately intended to reach. This is why the emphasis on local, community-based support and investment is so important and cannot be overlooked.
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