El-Salvador might just have fought a silver bullet for its socio-economic problems. Adopting BTC as legal tender was a masterstroke that will likely lift the country out of poverty for good.
Developing countries still stand to benefit the most from cryptocurrencies, considering the general setup of their economies. Most developing countries have a history of financial instability that weakened the currency and raised the barrier to entry for financial inclusion for most of the population.
Such countries are usually the ones with some of the highest inflation rates coupled with the weakest currencies with which to fight. Combine this with the population’s limited access to financial services, low trust in institutions, and government corruption and you have a cesspool of enticing conditions for crypto to thrive.
This combination of conditions is ideal for a high crypto-adoption rate, which we have so far seen in these countries.
Bitcoin continues to prove itself as a reliable hedge against inflation, year after year. Compare this with the dollar which continues to lose purchasing power over time, despite being amongst the stronger global currencies.
BTC and cryptocurrencies in general present themselves as a way to store savings to protect money from inflation erosion.
A common feature of developing country demographics is that more people have smartphones than do bank accounts. Such populations are predominantly young.
So you have a young, unbanked population, that all are all on WhatsApp and Telegram. How could crypto not thrive here?
The combination of limited access to financial services coupled with access to the internet also presents cryptocurrencies as a viable alternative to store and transfer value between peers and without expensive intermediaries.
The global unbanked population is estimated at 2 Billion people. BTC is helping this demographic access novel financial services as they have been locked out of traditional banking systems for one reason or the other. The barrier to entry for crypto is much lower, and all one needs is a smartphone and an internet connection.
The lack of intermediaries also means that corrupt government institutions would not have access to the citizenry’s money, nor would the citizenry be susceptible to haphazard government regulation that is likely to see a debasement of savings.
Government institutions in developing countries have consistently demonstrated incompetence, which means a low trust level for governments and their institutions in most developing countries.
Blockchain technology operates on inbuilt transparent cryptographic consensus mechanisms that do not need the stamp of approval of a third-party intermediary.
1. Remittances. Current remittance options take up to 20% of the total transaction sum sometimes. This is expensive. Cryptocurrencies are way cheaper to transact especially for small amounts of money, and the transactions happen instantaneously.
Current money remittances may take anywhere from a day to several days to complete. There’s a lot of value to be saved in the remittances ecosystem by adopting cryptocurrencies, due to cost savings.
2. Blockchain technology will upend the supply-chain industry due to its open-source tendency. It will be much easier to split the process open and identify where the bottlenecks and inefficiencies are.
Any parties benefiting from these blockades within the system will likely be thoroughly displeased with the introduction of blockchain technology into the supply chain. The upside however is that the time and money that will be saved is substantial.
BTC has become somewhat slower and requires prohibitively expensive electricity amounts. BTC is still the most widely recognizable crypto in the developing world, and the fact that it’s becoming more expensive to use can only affect adoption in the developing world.
Not a lot of the population in dysfunctional nation states understands the technology yet, owing to less-than-ideal technology penetration and literacy rates in some of these countries.
There is also the small matter of volatility, which makes cryptocurrencies difficult to use in any meaningfully consistent way. The fact that BTC can go up or down by margins as large as 20% simply makes it all the much harder to use as a daily medium of exchange in any consistently meaningful way.
A lot of governments have also voiced their concern if not outright contempt for cryptocurrencies as a whole. More proactive central banks have gone on to begin their own CBDC programs, whereas the more reactive ones have introduced stringent regulations against cryptocurrencies in their jurisdictions.
Cryptocurrency space as yet remains either this over-regulated suffocated space or this free for all wild west where drug dealers, arms dealers, and all manner of criminals have taken refuge.