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Beyond the Bubble: What’s Cool, Potentially Cool, And Clearly Not Cool About
Bitcoin in Financial Inclusion?
Editor’s note: Throughout 2017, NextBillion is organizing content around a monthly theme, dedicating special attention to a
speci c sector alongside our broader coverage. This post is part of our focus on digital nance for the month of December.

As you’ve likely heard, it’s a shockingly pro table time to own Bitcoin: As of this Tuesday morning, the cryptocurrency’s value had
TWITTER
gone up 47 percent in the past week, 181 percent in the past month, and 2,119 percent in the past year – and each new day (indeed,
each new hour) seems to push it to eye-watering new levels. So before the inevitable “market correction” hits, it seems like a good @NextBillionHC
time to examine the pros and cons of the cryptocurrency and its underlying technology. Here are four elements of the Bitcoin Only 5-15% of pe
#disabilities glob
narrative and how they register on the coolness scale, from the perspective of the nancial inclusion and global development access to quality
communities. devices. Is #3DP
includi…
  https://t.co/XVvs

NOT COOL: SPECULATIVE BUBBLES @NextBillion

News via @cnbc
African tech tren
It is hard to argue that the spectacular rise in Bitcoin prices that we’ve been seeing on a daily basis for the last six months is driven by out for:
new information that gets revealed daily on the future of the currency. When prices get disconnected from new fundamental https://t.co/xRyrO
information, or to put it di erently, when yesterday’s price rise is the only new signal that the market acts upon today, you are #Africa #mobile
witnessing a bubble. Enter the market at your own risk.
@NextBillionHC
A currency whose value goes up and down according to hype cycles is not likely to be one that low-income customers should use to The debate over
in #prosthetics:
save money, smooth out their consumption, or manage future lifecycle needs. And of course, we wouldn’t want that kind of instability
@JBenderCP br
to be the rst experience of digital money for those who have been previously nancially excluded. balanced views:
https://t.co/l6ATm
 

ARGUABLY COOL, BUT NOT FOR ME: A NEW GLOBAL CURRENCY SUBJECT
TO NO POLITICAL CONTROL NEWS V

Some people are drawn to the idea of a currency whose money supply is not managed by any central authority. That´s the case with
Bitcoin and most other cryptocurrencies: They eliminate the possibility for discretionary monetary policy and instead x the path of WEDNESDAY DECEMBER 20, 20

money supply mathematically up front for the rest of time. One can easily point to cases where central banks ran their currency into

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12/20/2017 Beyond the Bubble: What's Cool, Potentially Cool, And Clearly Not Cool About Bitcoin in Financial Inclusion? - NextBillion
the ground, through hyperin ation or outright currency con scations. And indeed, Bitcoin is becoming a popular nancial alternative Ethical Investors Tight
for residents of failing economies or countries in political turmoil, where dealing with Bitcoin’s price volatility may seem preferable to Screws on Emerging-M
trusting a poorly run bank or holding a local currency whose value is plummeting due to in ation. But I for one am happy that our Debt Issuers
central banks had some room to accommodate the monetary consequences of the global nancial crisis and the ensuing recession.
In general, I de ne progress as achieving more democratic accountability of policymakers rather than necessarily less policymaking.
So, the coolness quotient of sidestepping government control of monetary aggregates is questionable – as are the potential pros and
WEDNESDAY DECEMBER 20, 20
cons for the poor.
Top 4 African tech tre
  look out for

UNCERTAIN COOLNESS: BLOCKCHAIN-FOR-EVERYTHING

WEDNESDAY DECEMBER 20, 20
The logic of a decentralized money network is now being extended to pretty much all other forms of value that people can think of:
the authenticity of diamonds, the origin of fair trade goods, the ownership of nancial securities, the sharing of trade nance As wild weather hits c
documentation, the securing of personally identifying information, the sharing of farmer production data across value chain players, Ethiopian women turn
etc. I have no doubt that all these kinds of information can be digitized and put in the particular database structure that we call a savings
blockchain, and that the database can be distributed among hundreds or thousands of peer users, rather than limited copies of this
data being kept centrally. But would all that be transformational, in the way that freeing up the handling of money from banks could
be? Well, only if it results in a truly decentralized system, where nobody gets to play gatekeeper, where keeping the system honest is WEDNESDAY DECEMBER 20, 20
our collective responsibility. Asian Development B
For me, the key question is whether the information that would go onto the blockchain could be validated in a decentralized way.
Bolsters Micro nance
That was the big breakthrough with the Bitcoin protocol: Anyone can participate in the mining process by which we determine which
with $100 Million in A
transactions are real and which are not, and hence which Bitcoins are real and which are not. But with the non-monetary applications
Financing
I mentioned above, most often that information validation remains the preserve of a few in the know, whom we will continue to need
to rely upon and trust. How could I possibly be involved in determining whether the diamond you just bought or the agricultural yield
you just claimed were true? Only the seller of the diamond or the buyer of the crop could validate that. Interesting and novel as these
blockchain applications may be, most do not as yet address the core problems of institutional trust and commercial value choke CALENDAR VIEW
points.

  THURSDAY DECEMBER 28, 2017

CONVENERS.ORG: Acc
VERY COOL: DECENTRALIZED DIGITAL MONEY AND PAYMENT RAILS Stand-Up Call
Remember the old days when you could take nancial matters into your own hands? Remember when you could take a bank note
and stick it under your own mattress to save or pass it on to someone else to settle a debt? With our current system of digital money,
you can´t do that anymore: You need to involve one of a few licensed institutions to implement any and all of your nancial thoughts. THURSDAY JANUARY 4, 2018

And when banks are not keen to help you (because you don’t have recognized forms of ID, you live too far from where they have their First Subsistence Mar
branches, or they feel you are too poor to be pro table), that’s when you fall into the ranks of the nancially excluded. Bottom-Up Immersion
Conference
Bitcoin and the other cryptocurrencies change all that by shifting the locus of essential trust from third-party institutions like banks or
mobile money operators to software protocols, and by switching from a security model based on a web of closed/private systems to
one based on fully transparent systems and open source software. In this scenario, no institution need stand between you and your
digital money, though of course banks could still o er themselves as an upsell to nancial self-help (such as by paying interest on
saved balances and building up a pro le with which to get loans). People would be nancially included by having the right software POST ARCHIVE
on their phone that connects them to the Bitcoin network, and through that to everyone else – not just by currying the favor of a
bank. To throw some payments jargon onto it: Using Bitcoin would be like all of us being free to connect to the national Real Time
Gross Settlement System on our own behalf. Then we could truly say that bankarization (getting people bank accounts – a term often
SELECT YEAR
used in Latin America) is no longer a synonym for nancial inclusion.

And there’s an added bene t: Imagine how much a payments system that doesn´t need banks to operate would undermine
perceptions of banks as being essential, too-big-to-fail institutions that need to be routinely bailed out when they run into trouble.

THE NEED TO UNPACK BITCOIN

If you want to get to the bottom of Bitcoin (and the growing cryptocurrency eld), you need to unpack all of these di erent ideas. If
that interests you, you may consider taking an online course I have developed under the auspices of the Digital Frontiers Institute
called Bitcoin: Back to the Future, which will be o ered for the rst time in February 2018. This course is not designed to make you a
convert. We’ll look at the real practical issues about Bitcoin and its underlying technologies that make it not ready for prime time, as
well as exploring the full range of opportunities they present. But what I can guarantee you is that thinking about Bitcoin will
challenge everything you thought you knew about how digital money and digital payments ought to run. I hope that a deeper
understanding of the Bitcoin protocol will turn you into a bigger-picture thinker – if not necessarily a richer person.

Ignacio Mas is executive director at the Digital Frontiers Institute.

Photo by Angelx77 via Pixabay.

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CATEGORIES / Inclusive Fintech, Investing, Technology

TAGS / banking, bitcoin, blockchain, cryptocurrency, digital currency, digital nance, digital identity, digital payments, nancial inclusion, nancial innovation, ntech

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