As cryptocurrency makes the rounds across the globe, its buzz has reached Haiti in the form of donations and nascent projects. In this series, The Haitian Times takes a look at a few players and the pros and cons if digital currencies were to take root in Haiti. For definitions of certain terms used, view this glossary.
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WISCONSIN — “It is worth nothing. It is based on nothing. There is no underlying asset to act as an anchor of safety.” So said European Central Bank President Christine Lagarde about the value of cryptocurrencies, during a May 12 television interview, as the crypto market took a nosedive.
While the cryptocurrency market sent the economic sector into a tailspin, Haiti’s actual yam vendors — featured in some proponents’ visions — continued to sell their vegetables. Few of these vendors have access to financial services, a place to put their savings, a way to take out a loan. Some advocates of financial system reform in Haiti look to cryptocurrency as the technological and financial revolution that can provide that change.
But is cryptocurrency or the technology behind it — blockchains — the right solution and at what cost? These are the questions splitting proponents and opponents of cryptocurrency in Haiti into divergent camps.
“A blockchain network,” said Iwa Salami, co-director of the Centre of FinTech at the University of East London, “is very useful for any financial system, particularly if we’re looking at the fear amongst investors of investing.”
“For example, in foreign direct investments — in countries such as Haiti, the lack of transparency, a lot of times, is a problem for many investors. So, the adoption of blockchain technology and a financial system like this really has the potential to give those investors reassurance. They will be able to see where the investments are going and how the investments are being used.”
Cryptocurrency and blockchain technology
To fully evaluate the potential for crypto in Haiti, it helps to understand that cryptocurrency is built on a blockchain — a series of ledgers or databases, time-stamped and linked together. A network of computers manages a blockchain — not a single centralized system as in a database. Like using a Google doc or other collaborative document, everyone can see what’s happening in a blockchain.
“Some blockchains have no cryptocurrency,” said Raul Zambrano, an international development expert who researches innovation and technologies that can enhance access to public information.
Hyperledger, for example, is a blockchain platform used by businesses such as IBM and Walmart.
“They don’t want to get involved in the crypto stuff. It’s too complicated — it’s too risky, because of the prices and the expectations,” he said.
Blockchain has been used successfully in Haiti in certain instances as well. One mango supply chain project — overseen by the Haitian Ministry of Commerce and Industry, with World Bank funds — illustrated that products grown and processed in Haiti can be sold and shipped to the U.S. profitably. The agricultural project was declared a success when participating mango farmers earned 7.5 times more than before.
Notably, the participants were paid in gourdes, not cryptocurrency.
“You can actually deploy blockchain in Haiti without crypto,” Zambrano said. “You can have a blockchain for farmers who want to trace food from country to table. That’s blockchain. You don’t need crypto for that at all.”
Crypto systems require energy, a lot more than other systems
Concerns about cryptocurrency’s use swirl around transactions — how long they take, the cost and the amount of energy they consume.
Using Bitcoin, the average transaction takes 10 minutes, though that rate can vary widely. The average cost of a Bitcoin transaction as of May 23 was $115.52. Meanwhile, every single Bitcoin transaction — even buying a latte — consumes more than $100 in electricity, according to Fortune magazine.
“You have Visa. [It] can do 10 million [transactions] per second — and they don’t spend any energy,” Zambrano said. “Not as much as Bitcoin.”
“The vast computing power needed to create, or mine, new bitcoins has driven up energy bills for residents and businesses,” led a September article in Chicago’s Booth Review.
Researchers at the University of California at Berkeley analyzed public records of electricity prices and usage, as well as Bitcoin prices. Their study demonstrated that, because of Bitcoin mining’s power usage, households paid an additional $165 million per year in energy costs, while businesses paid an extra $79 million.
Since its transactions are so costly, unless cryptocurrencies move to a different method of processing transactions, Zambrano said, crypto will simply be a financial asset, not something to address services — such as buyer-seller transactions or remittances — in Haiti.
“We don’t have unlimited resources when it comes to energy,” Zambrano said. “In the age of climate change, you cannot just put high stakes for people to spend millions of kilowatts to approve 1,000 transactions. That doesn’t make any sense to me.”
Potential for abuse rampant
Dash is another cryptocurrency being introduced for potential use in Haiti. It was designed to improve Bitcoin’s perceived flaws.
“Dash has kind of positioned itself as a digital whole, the store of value,” said Ryan Taylor, a financial advisor to Dash Investment Foundation. This means it’s focused on being a digital cash used for actual transactions, he noted.
“That means being scalable. It means being inexpensive,” Taylor said. “Transactions on Dash’s network are within about 1.4 seconds.”
Dash, energy-wise, has blended elements meant to make it more energy efficient, according to Taylor, and to give it security and speed.
However, in “DASH Cryptocurrency: Complete Guide,” from Bit Degree, an online educational platform focusing on digital skills for the workplace, one section looks at how abuses can take place. According to the guide, it’s easier to evade taxes if the government doesn’t know who’s performing each transaction.
“Because Dash cryptocurrency transactions are anonymous and untraceable, it has become a preferred coin for illegal trades,” says the guide.
Tech still too nascent for complex uses
Overall, today’s platforms, including Hyperledger, still have limitations. Blockchain is akin to artificial intelligence in the 1950s, said Zambrano.
“AI was basically nothing in the 1950s. It took 60 years for AI to become what we see today, because the ideas of AI were ahead of the times,” he explained. “I’m waiting for the next generation of blockchains — so they could be more scalable, more efficient, use a different protocol for approving transactions.”
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Look for the next installment about the pros and cons of bringing cryptocurrencies to Haitians.
