Sometimes, the sheer complexity of a new technology can be off-putting. “Blockchain,” for example, isn’t nearly as sexy as drones or virtual reality or 3D printing. In fact, the only thing many people know about blockchain is that it has a vaguely sketchy uncle named Bitcoin. But in the past few months, blockchain as a distinct, constructive technology has come into greater focus. IBM opened a blockchain innovation center in Singapore, and dozens of international banks and payment companies boosted internal investments to leverage blockchain in their normal banking operations.
For many development professionals, however, it’s still not clear what blockchain technology is, or how it could influence their work in developing countries. Essentially, blockchain creates a permanent, public ledger. It is “distributed,” meaning data are transmitted by thousands (or millions) of devices. Records live in the cloud as a shared database, eliminating the need to buy and maintain an in-house data center. Its main advantage – readily apparent when a microfinance bank in Myanmar replaced Excel spreadsheets with a blockchain-based transaction history – is that the ledger is completely transparent and secure. Once blockchain is transmogrified into a viable product (i.e., within a few years), an organization could use it to record, store, and analyze millions of small financial transactions for a fraction of the cost of other organizations that rely on 20-year-old legacy systems. With the right combination of funding and implementing partners, blockchain could conceivably underpin a global digital ID system. This should perk up anyone striving to provide financial services to billions of unbanked people.
Blockchain’s potential has been somewhat muddied by negative headlines about Bitcoin, which poses a tacit threat to central or regional banks loathe to cede ground on monetary policy or currency control. But blockchain is gaining traction as a distinctly useful tool, independent of its uncle, able to count apples without flipping over the whole cart. Indeed, a recent article in the Harvard Business Review suggested blockchain technology could be used to securely track contracts, deeds, votes, music, intellectual property, and supply chains. In fact, blockchain’s ideal application may be in emerging markets, where regulations are looser, mobile currencies and micro-transactions are relatively common, and users want lower costs and more trustworthy service providers. The development community can play a vital role as this new technology matures. It can advocate for open source solutions, help government finance, trade, and banking authorities understand, test, and apply the technology, provide training and capacity building, and support early interventions through investment, partnership, and research. If blockchain fulfills its promise as a dynamic, enabling tool, the development community will have to master its complexity and wield it with confidence.