Blockchain Revolution

Breakthrough: Satoshi designed the system to work on top of the Internet stack (TCP/IP), but it could run without the Internet if necessary. Satoshi imagined that the typical person would be interacting with the blockchain through what he called “simplified payment verification” (SPV) mode that can work on cell phones to mobilize the blockchain. Now anyone with a flip phone can participate in the economy, or in a market, as a producer or consumer. No bank account required, no proof of citizenship required, no birth certificate required, no home address required, no stable local currency required to use the blockchain technologies. The blockchain drastically lowers the cost of transmitting such funds as remittances. It significantly lowers the barrier to having a bank account, obtaining credit, and investing. And it supports entrepreneurship and participation in global trade.

That was part of Satoshi’s vision. He understood that, for people in developing economies, the situation was worse. When corrupt or incompetent bureaucrats in failed states need funding to run the government, their central banks and treasuries simply print more currency and then profit from the difference between the cost of manufacturing and the face value of the currency. That’s seigniorage. The increase in the money supply debases the currency. If the local economy really tanked—as it did in Argentina and Uruguay, and more recently in Cyprus and Greece—these central bodies could freeze the bank assets of whoever couldn’t afford a bribe. Given such a possibility, the wealthy could store their assets in more trustworthy jurisdictions and more stable currencies.

But not the poor. Whatever money they have becomes worthless. Officials could siphon off inflows of foreign aid and ribbon their borders with red tape, adding friction to every attempt at helping their people, from mothers and children needing food and medicine to victims of war, prolonged drought, and other natural disasters.

The Australia micropayment service mHITs (short for Mobile Handset Initiated Transactions) has launched a new service, BitMoby, that enables consumers in more than one hundred countries to top up their mobile phone credit by texting mHITs an amount of bitcoin.⁵⁰ According to bitcoin core developer Gavin Andresen, “You don’t see every transaction; you see only the transactions you care about. You’re not trusting peers with your money, you’re just trusting them to give you the information touring across the network.”⁵¹

“The potential of using the blockchain for property records in the emerging world, where that’s a huge issue related to poverty,” is significant, said Austin Hill. “There isn’t a trusted entity that has governance over land title, and so allowing people to actually say, ‘I own this property,’ and then use that for collateral to improve them and their family situation is a fascinating use case.”⁵²

On a technical note, Andresen called on Nielsen’s law of Internet bandwidth,

where high-end user bandwidth increases by 50 percent each year, whereas the bandwidth of the masses tends to lag by two or three years. Bandwidth lags behind computer processing power, which increases by about 60 percent annually (Moore’s law). So bandwidth is the gating factor, according to Jakob Nielsen.⁵³ Most designs— interfaces, Web sites, digital products, services, organizations, and so forth—will need to accommodate the technology of the masses to leverage network effects. So inclusion means considering the full spectrum of usage—not just the state of the science of high-end users, but the slow tech and sporadic power outages of users in remote regions of the world’s poorest countries.