Can Bitcoin build a truly modern financial system and help the poor escape poverty?

Golden Finance News - Can Bitcoin help people get out of poverty? What if we can use Bitcoin to build a more fair and efficient financial system?

People expect to use Bitcoin to establish a more fair and efficient financial system. Image source: Golden Finance

Bitcoin has been around for nearly a decade, and despite numerous death predictions, it has managed to survive and become a recognized medium for transferring money, while also being considered currency in some countries like Japan.

Why has the existing financial system failed?

Large financial service institutions, including insurance companies, credit card companies, housing finance companies, remittance companies, etc., support the existing financial system. However, the problem is that although the existing financial system has existed for a long time, it has always been accessible. According to the World Bank, there are still 2 billion people in the world who do not have bank accounts. Therefore, the current financial institution payment system has actually entered an aging era.

The current payment system of financial institutions has entered an aging era. Image source: Golden Finance

People originally imagined that if they wanted to withdraw cash from their bank account, they should first deposit the money at a bank counter or ATM, and only pay the cost of using and maintaining the system.

Digitalization is the solution

Digitalization and modern technologies such as smartphones have many benefits. The World Bank’s working paper, “Global Findex Database 2014, Measuring Financial Inclusion Around the World,” states:

“There are many potential benefits for both parties involved in the payment process from cash to digital payments. It can improve payment efficiency by increasing payment speed and reducing payment costs.”

The report further states that the digitization of payments will increase transparency in transactions and provide the first entry point for establishing a formal financial system.

Money as the Financial System

Bitcoin and other cryptocurrencies have several advantages. First, there is no physical object, and the payment is completely digital. You don't need armored vehicles or any other infrastructure required to handle cash, which reduces transaction costs.

Second, some cryptocurrencies have built-in smart contract functionality that allows people to conduct secure transactions between each other without the need for intermediaries or other institutions.

MIT Technology Review recently quoted MIT Media Lab Director Joi Ito as saying about Bitcoin:

“Whether you’re an individual trying to gain access or a pensioner, there’s a lot of money tied up in the market. Bitcoin creates a more level playing field and hopefully reduces the complexity of the financial system.”

The poor need liberation

There is still a regulatory hurdle to overcome before digital currencies can go mainstream, but hopefully, as governments around the world begin to recognize Bitcoin as part of their financial system, it will help the future.

In addition, digital currencies are transparent, and cryptocurrencies like Bitcoin provide a public ledger of transactions. These cryptocurrencies can help the poor avoid the impact of cash. Digital currencies will also allow people living in remote areas to smoothly enter the transaction network.

At the same time, this also liberates financial institutions from having to establish infrastructure and staff in remote areas. From any perspective, the poor can gain a certain degree of freedom from the use of digital currency.