Can Blockchain actually eliminate poverty
By: Verified On Chain
Tags: Colored Coins, Blockchain, Economic Inclusion, Bitcoin, Appliaction Of Blockchain

A country can give itself an economic push when more and more people join its workforce. A country benefits when there is at least one earning member in every family. But, easier said than done. It gets a lot tougher for a country where one of the states is the sixth largest country in the world. Yes, I am talking about India and the glorious state is Uttar Pradesh. The population of US is 329 million and it is 221 million for Uttar Pradesh.

A large population means a large number of people below poverty level. It is a big cause of concern for developing countries like India. The government is of course doing its bit to fix it. Broadly, this can be addressed by following these three steps. First, by training more people. Second, by providing financial aids. Third, by creating more jobs.

Now, the first and third are in the hands of the government. With proper infrastructure, adequate funds, and precise execution, demonstrable progress can be made. The tougher and trickier bit is point two. How do you ensure that while a family is getting trained so that its members can become employable, the family is living in a liveable condition? How does the government ensure that the children are going to school?

It is a tough nut to crack. A government wants to solve the problem at the root. Fixing any problem superficially would only mean a constant flow of funds. That’s not what a government wants.

The problem statement that the government is working on is by investing x dollars, a four member family would start contributing to the growth of economy in the next y years. It wouldn’t want to invest beyond y years on this problem statement. It would expect the family to be self-sufficient by then.

All this calls for money. Loads of it.

That’s not the biggest problem in countries like India. In the year of 2016, Government of India transferred INR 4,84,600 Million as subsidies to the needy. At least from this end, the government is doing its bit.

So, where is the country lacking? How can we maximise output for the same input?

The problem primarily lies in distribution.

Ok. What does it mean?

The problem of distribution is solved to an extent in India by the implementation of “Direct Transfer of Benefits”. This eliminates the scope for corruption and the intended fund in fact reaches the intended bank accounts. That’s great. One problem out of the window.

What about the enforcement?

Blockchain — A hammer stronger than Thor’s

A few days back, a dear friend of mine sarcastically mentioned that he expected Blockchain to eliminate poverty soon. And proceeded to laugh. The sarcasm did not resonate with me. I couldn’t. Believe it or not, I actually do believe that Blockchain can eliminate poverty.

Blockchain can solve problems of enforcement and distribution that several developing economies face. Let’s see how.

I will assume that you have a basic understanding of Blockchain. I will not stress on it in this post. However, I would like to talk about one specific concept of Blockchain that I am going to propose will solve several challenges in distribution and utilization of resources.

Colored Coin

Bitcoin is a digital currency built on the Blockchain network. You can transfer and receive value or currency over this network. If we attach metadata to the currency, it can represent any asset you want it to. It can represent land, house, car, pen. Literally, anything.

You can leverage the benefits of the Bitcoin Blockchain network to store and transfer any physical asset. Given sensible implementation, it will be as decentralized, as secure, as open as the Bitcoin Blockchain network itself.

The Solution

Let’s say, the government wants to spend X amount of money towards the education of children of families below poverty. The government would create a colored coin network and attach “education fees” to the metadata of each token (or “coin”) on the network. It would transfer the coins to the bitcoin addresses of its recipients- in this case, families below poverty line. The family members would have to use a bitcoin wallet to operate it. Benefits are thus transferred without loss or leakage to the recipient end of the spectrum.

Now, say the government mandates or certifies a pool of schools (public or private) which would participate in this initiative. The families would transfer coins to the bitcoin address of the corresponding schools where the families want their children to study. Private schools are incentivised to participate as well for the business they get as a result.

The schools simply transfer the coins received from families to the bitcoin address of the government. Government, on receiving the coins, will transfer money (in INR) to the bank accounts of schools. And the government proceeds to burn the coins that have travelled a complete circle- from government to families to schools back to the government.

This makes the system largely watertight as long as selection of the recipients is done conscientiously and effectively. Families will not be able to spend the coins anywhere other than schools. This will ensure that the government’s effort would not be gamed and would not go waste.

This system can be extended to any benefits that the government wants to extend to citizens. It can create a colored coin for the construction of toilets. It can create a colored coin for polio vaccination. It can create colored coins for all sorts of benefit. Families would need an app. That’s about it. Rest would be taken care of by the ecosystem and Blockchain.

The possibility is there. The technology is there. All it needs is a gigantic push and belief from the government. If they believe in it, it can do wonders for the country. Intentions will be as close to outcomes as they possibly can be. The efforts will reap benefits as intended. Blockchain can and will solve poverty. Tomorrow, if not today.

I am going to call my dear friend now and tell him to be a believer.