Blockchain 'cure all diseases'? Gates Foundation objects

Bitcoin and other blockchain applications can help the world’s poor gain access to financial services, but the technology is not the cure-all it’s often made out to be.

This was raised at the Money2020 seminar held in Las Vegas by representatives from the Bill & Melinda Gates Foundation and the Omidyar Network, two well-known non-profit organizations dedicated to promoting financial inclusion (i.e., universal access to financial services).

While representatives from both organizations see distributed ledger technology (DLT) as having the potential to help them accomplish their goals, their enthusiasm for the technology is limited.

Kosta Peric, deputy director of financial services at the Gates Foundation, even expressed some disdain for the organization’s recently announced blockchain software, Mojaloop, an open-source software that aims to make different financial networks interoperable in order to help the world’s underserved.

Mojaloop uses Ripple’s Interledger protocol, he said:

This isn’t exactly a blockchain, but it’s partly inspired by it.

Slow and redundant

Peric is particularly indifferent to the application of Bitcoin and other public chains in inclusive finance.

He said blockchain cannot be used in domestic payment systems. Performance issues are one reason: Peric said no public blockchain can handle more than 1,000 transactions per second like domestic real-time payment systems.

In addition, public chains are not suitable for use in this field because "a country's payment data cannot be disseminated and used globally."

However, he commented that public blockchains make “a lot of sense” for cross-border remittances. But Omidyar Network partner Arjuna Costa said that the transfer of funds is not the only application channel of blockchain in inclusive finance.

He said:

In addition to payment, there is a lot of application potential that we have not yet discovered.

He mentioned two use cases that could help poor people get access to money, however indirectly.

One use case Costa points to is land registry, which helps people protect property rights and thus their lending rights. Another is using blockchain to analyze small business payment flows (including receipts and invoices) so that financial institutions can assess their creditworthiness and issue loans.

Costa said:

DLT has unlimited potential.

Bitcoin supporters

The person who was most enthusiastic about blockchain at the seminar was the conference host Christine Duhaime, the founder of the Digital Finance Institute, a fintech think tank in Vancouver, Canada.

Duhaime, who is also a lawyer specializing in anti-money laundering and counter-terrorist financing, said:

One of my favorite technologies of all time is Bitcoin.

To explain why she loves the cryptocurrency, she points to Code to Inspire, an organization dedicated to spreading coding knowledge to Afghan women, and teaching them how to find work online — and how to use Bitcoin. This gives women a degree of financial autonomy and privacy in a country where financial services are scarce or unsafe.