How Does Bitcoin Help Reduce Poverty?

A little over a decade has passed since cryptocurrencies were first introduced in the market. From being considered suspicious tools of nefarious activities to being recognized as one of the most important financial tools with the potential of revolutionizing the financial arena, cryptocurrencies have come a long way since then. Though the path has not been one without bumps and rough patches, cryptocurrencies, especially bitcoin help reduce poverty, have now acquired the position of legitimate digital currencies with many countries giving recognising them as legal currencies. 

The large-scale acceptance of cryptocurrencies has opened up numerous possibilities in the global economic system. As one can infer from visiting the link, dealing in bitcoins has now become easier than ever, making them even more popular. This popularity vests bitcoins with immense power, making them a chief subject of concern for economists worldwide. While many believe that bitcoin is of use only to the members of the affluent classes, a growing group of economists believe that bitcoin can go a long way in eliminating poverty. 

Although no sufficient evidence has yet been gathered to support such claims, there are numerous reasons to believe that bitcoin can benefit the less fortunate sections of society. Despite being mostly owned by leading businessmen and affluent individuals, the ease of access, absence of overhead expenses, ease of raising capital, and increased opportunities that bitcoins bring with themselves have the potential of alleviating poverty. Some ways in which bitcoins can eliminate poverty are:

1. Fosters financial inclusion:

In most developing countries, a significant section of the population remains uneducated because of poor quality of life. Since accessing financial services like banks require a minimum technical knowledge and education, these people are excluded from these services. 

Using bitcoins, on the other hand, does not require any formal education. All one needs is a smartphone, an internet connection, and minimal education to access them, which is often easily found among these people. Thus, such individuals can freely use bitcoins and access related financial services like borrowing, lending, or investing money. 

2. Ease of raising capital:

To eradicate poverty in any economy the flow of capital in it must be increased. However, with fiat currencies, governments are bound by several financial constraints and are therefore forced to limit the flow of capital within the geographic boundaries of the land. However, since cryptocurrencies are digital currencies that cannot be controlled by any government, raising capital becomes much easier through them. 

3. Opens new economic avenues: 

Cryptocurrencies can open up newer economic avenues in any developing economy. Since they are not regulated by any national government, foreign trade and transactions are hassle-free. This can encourage even small business owners to expand their business in the international sphere and help them grow. 

4. Reduces transaction fees: 

Traditional financial institutions like banks often charge huge transaction fees from their customers. Since bitcoins do not involve banks or any other financial institutions, overhead expenses are not required. The use of blockchain technology and lack of third party involvement has enabled bitcoin transfers to avoid hefty transaction fees. This encourages people in developing countries to invest in bitcoins, wherefrom they might incur massive future gains. 

Due to the impact of bitcoins on the market, even banks are adopting blockchain technology to avoid third-party inference. This would reduce transaction costs even in traditional banks and make it possible for people in developing countries to approach them for financial services. 

5. Guarantees transparency:

The problem of corruption is another major cause of poverty and lack of progress in developing nations. Bitcoin can help in combating this problem too. Since all bitcoin transactions are stored in public ledgers, they guarantee transparency and accountability, removing all scope for corruption. 

Conclusion: 

It is undeniable that bitcoins have immense potential for bringing about progressive change in the world’s economic, social, and even political systems. However, one must remember that bitcoins are mere financial tools that need to be used properly to be effective. Bitcoins can only help alleviate poverty when coupled with proper leadership, welfare orientation, and effective governance.