Could the Blockchain, the technology underpinning digital currencies like Bitcoin, transform how our economies work and foster financial inclusion and gender equality? WIL had the pleasure to interview WIL Board Member Marina Niforos on this topic.

Marina is the founder and Principal of Logos Global Advisors, a strategic advisory firm to high-growth startups and large multinationals and a recognized expert, author and speaker on economic competitiveness and digital transformation. Recently, her whitepaper series the impact of blockchain were compiled in a special International Finance Corporation (IFC) Report, Blockchain: Opportunities for Private Enterprises in Emerging Markets, that has been distributed in the context of the World Bank’s Annual Meetings.

If you had to explain Blockchain to a total newcomer, what is the most exciting thing about it?

Blockchain is an emerging technology that offers the possibility of re-engineering economic models and enabling the creation of markets and products that were previously unavailable or unprofitable across emerging markets.  Blockchain is a database ledger that functions like a distributed network. It is often referred to as a distributed ledger that can register blocks of cryptographically-secure, tamper-proof data with members of a network. This unique structure offers near-frictionless cooperation between these entities, allowing them to transfer value or information without need of a central authority or intermediary. Its potential to deliver a new mechanism of ‘trust’ and to significantly limit transaction costs offers great promise for leveraging the technology to boost economic development in emerging markets. Evangelists call it a digital revolution and sceptics dismiss it as a combination of existing technologies with exaggerated potential. Despite its detractors, venture capital flowing into blockchain companies hit $544 million last year, according to KPMG.

"Blockchain is an emerging technology that offers the possibility of re-engineering economic models and enabling the creation of markets and products that were previously unavailable or unprofitable across emerging markets."

Blockchain’s ability to send blocks of cryptographically-secured, tamper-proof data through a decentralized network provides a scalable, secure system that can be applied to all kinds of transactions. The technology can help identify, authenticate, and track goods moving across different countries and modes of transportation. Ethereum — a second-generation blockchain — provides a programmable blockchain platform with ‘smart contracts’ that can be used in numerous scenarios, including the transfer of property titles, settlement of financial derivatives, shipment of goods, and payment of royalties to artists.

Does it hold a potential to transform the economy and can we speak about the second generation of internet? Which industries will benefit most from it and what challenges does Blockchain still needs to overcome to become a mainstream technology? 

Blockchain holds enormous potential to transform our economy. What the Internet did for the exchange of information, Blockchain can do for the exchange of value, eliminating the need for a trusted third party to authenticate and validate transactions and thereby significantly disrupting existing business models. It has the potential to deliver productivity gains to multiple industries, from the financial sector to energy markets, supply chains, health care, intellectual property management, the public sector, and beyond.

"Emerging markets may prove to be ideal for the adoption of blockchain-based financial solutions due to their underserved populations, higher banking risks, lower bank penetration and legacy systems, and greater presence of digital financing."

The financial services industry has been an early experimenter on and adopter of blockchain technology. Financial institutions around the world find their business models continually tested by technological innovation. The emergence of innovative digital financial technologies (fintech), including blockchain, is challenging traditional players in the sector by demonstrating new ways to deliver value across the entire financial value chain. And emerging markets may prove to be ideal for the adoption of blockchain-based financial solutions due to their underserved populations, higher banking risks, lower bank penetration and legacy systems, and greater presence of digital financing. The convergence of these factors may provide the basis for a faster adoption of the technology and could result in a technological leapfrog that boosts financial inclusion and growth.

The technology is in early stages of development and will need to overcome serious challenges and risks, both technical and regulatory, before it achieves widespread adoption. Questions remain about blockchain’s scalability, interoperability, security, transition costs, data privacy, and governance. We are at the beginning of this experiment and the road to maturity is likely to create both winners and losers before sustainable and profitable business models can emerge and full network effects can be seen. Companies and regulators will need to strike a balance between allowing enough space for the innovation ecosystem to flourish, while also effectively managing the associated risks and costs. Companies—in emerging markets and elsewhere—can neither afford to wait until the outcome is evident nor expose their existing business models to overly risky wholescale blockchain initiatives. Instead, they will need to adopt an experimental approach that allows them to develop options and thereby learn in the process, inform their strategies, and improve their value propositions.

In your final white paper, you make the case about Blockchain being the technology of inclusion. How can it address the barriers to gender equality? 

Blockchain can also be used beyond fintech for a more sustainable and inclusive management of global supply chains. Two critical attributes of the blockchain in particular—the reduction of agency costs and auditable traceability—may help to boost trade facilitation as well as ensure compliance with specific goals regarding sustainability and gender inclusion. Two supply chains where specific experimentation with blockchain is taking place are food and agribusiness, and pharmaceutical safety.

"Two critical attributes of the blockchain in particular—the reduction of agency costs and auditable traceability—may help to boost trade facilitation as well as ensure compliance with specific goals regarding sustainability and gender inclusion."

Blockchain offers the potential to address some of the barriers to women’s inclusion in global value chains and their economic empowerment, both as individuals and as business owners. It could provide a cost efficient digital identity, which can help overcome women’s comparatively low access to formal identification and offer an entry to formal roles and remuneration in supply chains. It could also help women establish ownership of disputed land titles. Additionally, it could promote financial inclusion by helping women establish credit scores through alternative credit data sources, bypassing traditional intermediaries and banks. Finally, blockchain’s auditability and traceability can provide a tool for the monitoring and enforcement of supplier inclusion and gender empowerment initiatives that are currently difficult to monitor and enforce. Investors and credit agencies are now paying greater attention to non-financial performance issues, including human rights and gender equality. While blockchain technology alone is not sufficient to address the cultural and structural issues underlying the challenge of gender equality, it does present a strong toolkit to tackle significant facets of the issue. The potential benefits of even marginal change can be significant for both the private sector and entire economies.