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Published on Oct 16, 2013
The second in a series on the Breakthrough Benefits of Bitcoin, this episode highlights bitcoin’s ability to provide full banking services for over half the world’s population, the unbanked billions. Few realize how badly the unbanked epidemic has hit even the US. Can leapfrogging technology, like bitcoin provide the ultimate solution?
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A full decade before the financial crisis of 2008, then US Representative Joeseph Kennedy held a press conference to lash out against the abuses of banks.
But his wasn’t an attack on the big banks, it was on the smallest.
Kennedy pounded the neon-sign check cashing centers that are staples of urban areas, calling them the “the worst predatory beasts in the urban jungle”……………..
whose victims are exclusively the nation’s poor.
Sure, payday loan centers offer advances on paychecks, but their rates are some of the highest on earth, hovering close to 30%.
So, with such high interest, how can these debt machines exist?
Well what many don’t understand is that while over half the world’s population has no access to banking……..
many of the same rules apply here at home, leaving scores of people unbanked even in the most developed countries.
In the US alone, over 10 million households have no bank account at all, and not for lack of wanting.
To cash a check, send money, get a loan or even save, America’s poor are forced to pay soaring rates for the same services the rich get for free.
Simple, basic banking, it turns out, is one of the major reasons why it is often more expensive to be poor.
The irony though is biting.
Most agree that banking services are an essential tool for escaping poverty.
Money in a bank is less likely to get stolen, it is easier to move, receive, invest and protect.
With data suggesting that the drawbacks of being unbanked hit women even harder.
Still, with these mounting problems it seems likely that leapfrogging technology and not the largess of banks will provide the solution.
In the economics of development, leapfrogging applies to any technology……. that has proved so cumbersome and expensive…………
that the third world skipped it entirely by adopting an ultra-cheap digital version.
For most of the world’s poor who never had landlines, record players or even reliable mail services…………………their now ubiquitous cellphones have provided all three at far less cost.
But as the leapfrogging technology continues, many pundits suggest that banking could be next.
And this doesn’t mean banking BY phone where users can access their account information from afar………
but instead banking WITH your phone where all banking and money resides entirely inside your cellphone.
No bank required anywhere.
This sci-fi worthy idea seemed utterly impossible until the 2009 development of bitcoin.
A combination of currency and protocol, bitcoin is ideally suited to provide full financial services to the world’s unbanked billions.
And the benefits seem almost exaggerated.
With no fees, background checks, required documents, or age limits, bitcoin elimates the harsh exclusions of traditional banks………
instead, offering, instant & free accounts to anyone with a cross border openness that is reminiscent of email.
Better still, bitcoin’s protocol provides an ever growing list of features……………….
Which, as Naval Ravikant suggests, include free escrows, wills, trusts, notaries, revokable chargebacks, proof of contracts and more.
Like others, Ravikant makes the remarkable claim that bitcoin has the tools to replace EVERYTHING that is done on Wallstreet………………
putting them in the hands of……..well, anyone.
For the world’s unbanked billions, this extreme openness and thrift could be a breath of fresh air.
For Joseph Kennedy it might help clean up the neon despair of urban america.
For microfinance institutions, accounting and distribution become infinitely easier.
And for the rest of us, well…..adding 3.5 billion people into the world’s economy could bring benefits no one can forsee.
That future, however….
depends entirely on how we decide to use our little leap-frog banks.