The Future of Finance: Exploring Blockchain’s Potential in Developing Economies

By Mr Sidhavelayutham M

Blockchain technology, which underpins cryptocurrencies such as Bitcoin and Ethereum, has been hailed as a game-changer for the global financial system. But beyond its applications for digital currencies, blockchain also offers a range of benefits for developing economies, especially in areas such as banking, trade, agriculture, and governance.

How Blockchain Technology Can Benefit Developing Economies

Blockchain technology enables peer-to-peer transactions without the need for intermediaries such as banks or governments. It also provides transparency, security, and immutability for the data stored on the blockchain. Moreover, blockchain technology can support smart contracts, which are self-executing agreements that are triggered by predefined conditions.

According to a report by PwC (PricewaterhouseCoopers International Limited), blockchain technology has the potential to boost global gross domestic product (GDP) by US$1.76 trillion over the next decade. The report identifies five key areas where blockchain can create value: provenance, payments and financial services, identity, contracts and dispute resolution, and customer engagement.

For developing economies, blockchain technology can offer solutions to some of the most pressing challenges they face, such as:

• Financial inclusion: According to the World Bank, about 1.7 billion adults remain unbanked globally, meaning they do not have access to basic financial services such as savings, credit, remittances, and insurance. That’s where Blockchain technology steps in and revolutionizes traditional financial systems. It can enable low-cost and fast cross-border payments, as well as peer-to-peer lending and microfinance platforms.  By offering transparent, immutable, and secure ledger capabilities, blockchain can extend financial services to the unbanked and underbanked populations. Through decentralised finance (DeFi) platforms and digital identity solutions, individuals in remote areas can access banking services, secure loans, and engage in peer-to-peer transactions without relying on traditional banking infrastructure. Moreover, blockchain’s ability to reduce transaction costs and eliminate intermediaries can make financial services more affordable and efficient, ultimately bridging the gap between the financially excluded and the global economy. As blockchain technology continues to evolve, it holds the promise of levelling the financial playing field and fostering economic growth in developing nations.

• Trade facilitation: Blockchain technology can improve the efficiency and transparency of trade by reducing transaction costs, enhancing trust and security, and simplifying documentation and compliance. Blockchain can also enable traceability and verification of the origin and quality of goods along the supply chain.

• Agriculture development: Blockchain technology can empower smallholder farmers in developing countries by providing them with access to market information, financing options, insurance products, and certification schemes. Blockchain can also improve food safety and security by enabling traceability and verification of agricultural products from farm to fork.

• Governance improvement: Blockchain technology can enhance the accountability and transparency of public institutions and services in developing countries. Blockchain can also enable citizen participation and empowerment by providing them with access to reliable information, identity verification, and voting systems.

Conclusion

By enabling peer-to-peer transactions, transparency, security, and smart contracts, blockchain technology can create value across various sectors and domains, such as banking, trade, agriculture, and governance. However, blockchain technology also faces some challenges and limitations that need to be overcome, such as regulatory uncertainty, technical complexity, and social and cultural barriers. Therefore, there is a need for a holistic and collaborative approach that can foster the adoption and implementation of blockchain technology in developing economies.

One of the ways to facilitate this approach is to leverage the expertise and experience of existing players in the online trading space, such as Alice Blue, an award-winning discount brokerage firm that offers blockchain-based solutions for investing in stocks, mutual funds, IPOs, commodities, and currencies. Alice Blue is one of the leading examples of how technology can enable low-cost, fast, and secure financial services for customers across India. Customers can sign up for a free account, and start investing or trading. Additionally, customers can access educational resources on financial literacy, and join a community of like-minded investors and traders. By taking these steps, customers can leverage the power of technology to achieve their financial and development goals.

(The author is Mr Sidhavelayutham M, Founder & CEO, Alice Blue, and the views expressed in this article are his own)