Chapter 1: The Divide Between Banked and Unbanked

In today's world, approximately 4 billion individuals are part of a documented and banked society, while about 3 billion remain unbanked and undocumented. This disparity is significant. Increased banking access correlates with improvements in life expectancy, wealth accumulation, and equal opportunities. Conversely, those in unbanked regions often face challenges such as poverty, insecurity, and reduced life expectancy.

This presents a stark contrast: centralized systems primarily benefit one half of the global population, leaving the other half struggling for basic opportunities.

Consider two scenarios:

Jack Nash, a 30-year-old American, has a university education, a stable job, owns a home and a vehicle, and maintains a bank account. He also has loans, insurance policies, and occasionally sends money to his cousin in Kansas.

In contrast, Hassan Alaydrus, a Sudanese aged between 30 and 35, lacks reliable documentation, making his age and work history uncertain. Living in a cash economy, Hassan rides a bicycle, faces challenges with verifying his criminal history, and pays a hefty 15% exchange fee to receive funds from his brother in Egypt. His transactions rely on verbal agreements, and internet access is nonexistent.

This scenario reflects the reality for nearly 3 billion people around the globe.

Jack can send money to his cousin with minimal fees, while Hassan endures a 15% charge to access funds. Jack benefits from affordable credit options, whereas Hassan might face exorbitant interest rates of 35-80% if he could even qualify for credit (according to CGAP estimates). In a crisis, Hassan lacks proof of ownership for his property, while Jack has legal documentation to support his claims.

Peruvian economist Hernando de Soto estimates that a staggering $10 trillion in assets and properties is tied up in underdeveloped countries due to a lack of proper documentation. Research shows a direct link between a nation's wealth and its property rights system, as real estate serves as a form of capital that boosts economic productivity and fosters wealth, according to Loup Brefort, Country Manager for Serbia at The World Bank.

So, what is the remedy for this severe inequality? The answer lies in blockchain technology, which has the potential to revolutionize our world even more than the Internet did.

The Future Will Be Decentralized | Charles Hoskinson | TEDxBermuda

In this TEDx talk, Charles Hoskinson discusses how decentralization through blockchain technology can empower individuals globally, particularly those who are unbanked.

Chapter 2: Transformative Power of Blockchain

Three essential elements are set to reshape the global financial landscape: blockchains, decentralized transaction systems, and smart contracts.

Blockchains function as unique databases, storing information in blocks that are sequentially linked together. This structure ensures that once data is added, it becomes immutable and time-stamped. The decentralized nature of blockchains means no single entity controls the data, making them ideal for recording property rights, identities, and agreements.

Decentralized transaction systems are emerging as powerful tools to challenge traditional models. For instance, Namecoin offers a censorship-resistant domain system, analogous to .com or .net but independent of centralized governance.

Blocksign has launched an electronic signature platform that allows users to upload documents and apply legally binding signatures, creating a new standard for digital agreements.

Ethereum, developed by Vitalik Buterin, is more than a cryptocurrency; it serves as a marketplace for financial services, games, and applications that prioritize user privacy and data security.

Smart contracts are revolutionizing services that are currently centralized. They can replace conventional platforms like Amazon and eBay and decentralize financial products such as stocks and bonds. By tokenizing web services, smart contracts eliminate the need for intermediaries, streamlining processes and enhancing efficiency.

Bitcoin and Blockchain 101: Why the Future Will Be Decentralized | Big Think

This video provides a foundational understanding of blockchain technology and its implications for a decentralized future, emphasizing the benefits for the unbanked.

Final Thoughts: A Bright Future for the Unbanked

Reflecting on Hassan Alaydrus's situation, blockchain solutions could provide him access to credit, property ownership, low-cost transactions, and a reliable historical record. This technology can offer him a censorship-resistant, accessible digital identity. Data stored on the blockchain would remain intact and unaltered by government interference.

With a secure digital history, new metrics could arise within a decentralized finance (DeFi) framework, enabling credit access, reliable documentation, criminal background checks, and insurance options. Furthermore, it would facilitate affordable cross-border remittances, allowing Hassan's brother to send money with minimal fees.

Currently, only 20% of Africa's population has access to banking services. However, two-thirds possess cell phones, indicating a pathway to blockchain access and the potential for economic uplift through its services.

The future is indeed decentralized, and this bodes well for those previously marginalized. Even modest advancements in addressing the constraints faced by the least developed countries would make blockchain invaluable.

Disclaimer: This article serves informational purposes only and should not be interpreted as financial or legal advice. Always consult a financial professional before making significant financial decisions.