How Blockchain Technology Could Help Developing Countries Part 9

Decentralization of blockchain technology. Corruption in the developing world.

 

Blockchain technology doesn’t just cover financial transactions or management of identities. The technology could cover the entire process in a transaction, from storing a profile, to identifying a person, to processing a transaction in a secure and immutable manner. This security is critically important for people in the developing countries.

What also matters a lot is that blockchains are decentralized networks, meaning that it doesn’t matter where in the world miners process transactions or where in the world the nodes on a network are located (a node on a blockchain network is a computer with a full copy of the blockchain. For example, you can see the number and locations of all the nodes on the Bitcoin blockchain that are online as you are reading this article by visiting https://bitnodes.earn.com). In the past, geography has often been a problem for developing countries. For example, a bank may want to open branches in a certain area, but to do so in the past it would also need to open a data center or a processing center that is located not too far from the branches. The “not too far” has often been a critical issue because many areas in the developing countries had no infrastructure that would allow banks to build the centers. Such areas may also not have had qualified employees, which also doesn’t matter with blockchain technology because the technology can automate processes and transaction flows. Because of all of this, developing countries can create their own data and technology hubs anywhere they want, and if these hubs develop or even simply start using blockchains, the technology would be as secure as it is anywhere else because the technology does not discriminate based on the location.

 

Corruption as one of the biggest problems in the developing world

In 2013, Jim Yong Kim, the president of the World Bank Group declared corruption as the biggest enemy of the public in the developing world. When delivering the declaration, Kim explained the reasons why corruption is so dangerous.

In developing countries, incomes of people are much lower compared to the developed countries. This means that people spend a larger percentage of income on absolute life necessities. For example, when somebody in a city like New York is getting a $200,000/year salary and spending $50,000 – $100,000/year on living expenses, they have $100,000-$150,000 that they can spend on whatever they want, including vacations, luxuries, restaurants, foods, and more. The list of what people in developed countries spend money on is almost infinite. This kind of spending is also known as discretionary spending.

In the developing countries, many people live on as little as $1 or $2 a day, which means that they do not have any money for luxuries. When a country has corruption, every dollar that residents of the country give to a corrupt official is a dollar taken away from needed healthcare, from education, water or food. Also, in a country that has a high level of corruption, corrupt government officials are not really interested in building better roads, schools or education systems. Their priority is enriching themselves and staying in power for as long as they can as long as it means personal enrichment.

 

Main corruption themes

When people start discussing corruption in the developing countries, they eventually end up discussing one of the following three issues. The first one is measuring levels of corruption. In the developing world, it is oftentimes hard to measure even things and numbers that are available and one of the issues with corruption is that government officials that engage in it obviously are not interested in anybody knowing what is happening.

The second theme is how corruption always has adverse consequences on the life in a country, from macro events and systems such as the healthcare system, education system and infrastructure, to micro events such as people spending money on giving bribes instead of receiving the services that they are supposed to get.

The third theme is how the behavior of people works when there is corruption or some other illegal actions. One of the main points that come up in regards to this issue is that corrupt behavior follows the principles of the economic theory and the situational psychology. Corrupt officials act just like the incentive theory of economics predicts they would act.