One Billion Hidden Blockchain Consumers

Banking Africa Continent of Dreams Economist 2013

Over one billion hidden consumers are in need of services that blockchain technology can provide. Africa is one consumer market that lays virtually unclaimed. African markets start from the ground up rather than the top down. Infrastructure is relatively inexpensive compared to many countries. When attempting to centralize modern businesses, upgrading hardware or software of local branches is difficult to do correctly when updating outdated systems. For a larger company, to create a new branch, financial data and records dating from the 1960's must be transferred and updated to a new system. That creates the struggle, normally, when attempting to modernize entry into new markets.

Business that offer traditional banking services are now expanding into these new regions and running into hurdles. To become the market leader in these regions, businesses must build their brand from scratch, which is causing slow distribution. Retail banking must rely on organic growth. Consumers must be able to gain access to their funds, and is the reason that many new financial institutions need multiple branches to start.

Mobile banking is the primary way to transfer funds in developing markets. Very few Africans have access to international banking for that reason. This leads as a bridge for innovation of blockchain services to reach those one billion previously unobtainable consumers. The International Monetary Fund has taken note of Africa's fast growth, as well as their fast adoption rate of non-traditional financial services (IMF, March 2013). Payfast is an example of a popular nontraditional service that offers African businesses an online payment process and is the current competitor to future blockchain services. African nations are also educating themselves about digital currencies as much as western countries. Google search trends show Ghana surpassing other major countries in searches over the last few months in relation to blockchain and bitcoin services.

One group that has shown a spotlight into Africa's rising mobile banking market is the Bill and Melinda Gates Foundation. Last month, the foundation made a proclamation that mobile banking will be a part of the solution to improving the lives of about 2 billion poor individuals. CGAP is a non-profit mentioned in the Bill and Melinda 2015 annual letter and is moving to increase financial inclusion to improve the lives of the poor. A published report from CGAP states that 36 new businesses have already started to move into Africa's digital market (January 2015). I recommend taking the time to read the Bill and Melinda Gates Foundation's 2015 Annual Letter, for more information on the growing interest in mobile markets.

Blockchained services are forming to create solutions to not only growing markets, such as Kenya and Ghana, but also Western countries as well. Blockchained companies are not limited to many regulations and countries are attempting to secure this technology as best they can as it evolves. The Crypto Currency Security Standard was drafted as a benchmark for blockchained companies and is a collaborative effort from industry leaders. Similar to the W3C, the Crypto Consortium is a guideline for companies that use blockchain and bitcoin technology and provides certification of their level of knowledge of crypto-currency use. Certification and security are the biggest concerns for consumers in the early adoption phase of crypto-currencies and blockchain technologies.

As businesses begin to emerge in the technical space of blockchain technologies, educating yourself is the most effective loss prevention technique. Provided in the external links section is a non-technical video of Bitcoin and the basics of blockchain technology in use today. The CCSS certification test provides a list of reference material for the CBP certification exam that is provided on the side. Companies attempting to create appeal in these new markets would want to have this and similar certifications. The difficulty of creating these new products from blockchain technology will become smaller as more products are developed. If you were concerned about the technology at this point, you do not have to enter a decentralized market. I will highlight the mobile markets in Africa later in the week. What other services could adopt this technology? 

Blockchain Technology in Action

Companies that integrate blockchain technology all integrate decentralized ledgers. Blockchained companies use a decentralized ledger to secure information. Trust no longer needs to be a risk when a third party handles anything that holds value to the user of that service. The figure below demonstrates how a service using blockchain technology handles information flow.

The flowchart shows three services of a blockchain company can provide. The handling use of multi-sig verification via wallets to gain access to the data in individual blocks, the creation of a block that stores information on a decentralized ledger, and the ledger itself run by designers and miners for that company. These sectors are evolving as problems are discovered and solutions are applied.

Blockchain technology is still in development stages and there are issues that need to be solved before mass adoption. Early innovation in computers and internet technology were also riddled with complex problems to solve before mass adoption. Problems blockchained companies need to solve are mostly unique constraints the blockchain has designed into the system. This is creating a tech boom which some are comparing to that of the early internet days as companies are trying to find the best solution to each problem. The New Yorker published a piece a few years ago highlighting a few  concerns for bitcoin at the time.

For example, the size of a block of data on the blockchain is limited to 10MB a block. Not ideal for large files or handling a large volume of transactions. Members of the community are debating future sizes of a block on October 8th last year.  The lack of a user friendly interface also intimidates outsiders that do not have basic programming knowledge. If someone sends a bitcoin, or any token on a blockchain network, there is no way to cancel a transaction once it has been recorded.

 

Ethereum and Factom are companies that allow users to design software based on the blockchain technology. These companies advertise the ability to create contracts, gaming apps, store medical records, financial data, and other services.

The tech space for designing and creating solutions with blockchain technology will only grow in the next few years as more security is added to each network. Keep an eye here for more companies that are Blockchained and what you should educate yourself about. Next week I will talk about how Ghana and other underdeveloped nations are being affected by blockchain technology.