Blockchain and Cryptocurrencies for the Wellbeing Society
To develop projects aimed at empowering communities using Blockchain technology.
As a think tank partnering with Portuguese universities and Blockchain software companies to develop mechanisms to anonymously and securely track and measure workers' wellbeing with a digitally authenticated Blockchain solution.
Blockchain is a way to securely link multiple databases and financial information and turn them into a single virtual database.
In a Blockchain platform, all transactions are recorded securely so that everyone using the system can see the changes and have access to the same information.
The concept is also being used to develop some systems to handle financial transactions, monitor stocks and trade their own energy.
In the future, for example, Ethereum, which is a technology that lowers the barrier of trust between two parties and creates a transparent environment for workers to share critical information securely and anonymously, can be used to develop, test, and scale a system that can empower employees, suppliers, and consumers to make informed decisions about factories, products, and brands based on real parameters of the Wellbeing Economy.
Cryptocurrencies for Wellbeing
Cryptocurrencies have been widely considered as a tool to support the growth process in developing countries.
In fairness, these can provide significant benefit by overcoming the lack of social trust and increasing access to financial services (Nakamoto, 2008), as they can be considered as a means to support the growth process in developing countries by increasing financial inclusion, providing better traceability of funds and helping people escape poverty (Ammous, 2015).
But the first advantage is that cryptocurrencies combine important properties to foster trust, such as accountability and transparency, which enables trust-free interactions between counterparties. The underlying Blockchain technology uses consensus mechanisms, hash functions and public and private key encryption to control transactions, which leads to the user not having to trust the counterparty. However, the user must trust the network and the underlying Blockchain. It is therefore essential to protect the Blockchain against fraud and attacks.
For central bank-issued currencies, trust is established by third parties as intermediaries, and in almost every digital transaction in a fiat currency, an agent is employed to oversee the exchange. Transactions conducted by intermediaries not only take time, but also result in a risk premium for the user due to higher transaction costs (Pilkington, 2016).
Another benefit of the decentralisation of cryptocurrencies is that governments cannot manage them. Thus, these 'crypto coins' are not restricted to a specific geographical area and can be traded worldwide. Bitcoin can therefore be used to provide low-cost money transfers, particularly for those looking to transfer small amounts of money internationally, such as remittance payments (Scott, 2016). This money can often be transferred cheaper than with central bank-issued currencies because the use of cryptocurrencies allows for global financial transfer without the need for an intermediary institution. In addition, the speed of money transfer is increased by eliminating intermediaries.
However, these border-independent payments also have some negative aspects, which need to be considered. One characteristic is that they facilitate the transfer of money from illegal activities or to fund terrorist activities without the possibility of government intervention (Fernholz, 2015).
In contrast to traditional money transfers, the user in the Bitcoin is pseudonymous. Unlike a bank account user, he does not have to go through a "Know Your Customer" (KYC) process, where the user has to identify himself, to gain access to the Bitcoin market.
Furthermore, decentralisation and "the lack of flexibility in the Bitcoin supply schedule results in high price volatility" (Iwamura, Kitamura, Matsumoto & Saito, 2014). This high price volatility is not only true for Bitcoin, but also for most cryptocurrencies, which makes it difficult to store money and make contracts in "cryptocurrencies" (Lo, 2014).
The lack of flexibility in the timing of Bitcoin supply results in high price volatility.
Another aspect of cryptocurrencies is that they support financial inclusion because they do not require high technological standards, beyond having access to the internet and a digital device (e.g. a smartphone) to conduct transactions (Dow Jones Institutional News, 2018).
Furthermore, no government or central bank can influence the supply of cryptocurrencies because the supply is defined in the underlying protocol of the cryptocurrency (Nakamoto, 2008). Therefore, no state can influence the flow of money, which limits governmental power.
As with the analysis of economic problems in developing countries, cryptocurrencies can accelerate the development process potentially in various fields. In general, new technologies and innovations are key solutions for the recovery process of developing countries, as Chudnovsky and Lopez (2006) pointed out.
People need Internet access to benefit from cryptocurrency-based improvements, as only people with Internet access can trade cryptocurrencies. For this reason, it is good and necessary that Internet usage in developing countries has increased dramatically during the last decade (Aker & Mbiti, 2011).
Conclusion
Overall, cryptocurrencies can have a considerable impact on developing countries by increasing the financial inclusion of individuals and businesses. In particular, by reducing transaction fees and time, cross-border payments can be improved. This is beneficial for remittance payments, peer-to-peer lending and international trade. The underlying technology also supports the fight against corruption by having a more transparent tracking system for the use of funds.
However, all these benefits are heavily dependent on the mass adoption of these currencies and fulfilling the three functions of money, and this is currently not given due to excessive price volatility. The lack of support and centralisation does not support a stable price level (Ammous, 2018). A stable price level could be achieved through stronger regulation and more political support for "crypto coins". However, cryptocurrencies can only gain political support if the government or central banks have control over the money supply (Jaag & Bach, 2015). However, this would reduce many benefits that cryptocurrencies have.