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The Age of CryptoFinance�How CryptoFinance will transform the world�
�Johann Gevers, CEO and Founder
TerrorismFinancial crisesCorrupt governmentsNatural disastersClimate change
Problems
1. Trade barriers�
2. Health (contraception, disease,� malnutrition)
3. Education (illiteracy)
—Copenhagen Consensus
The World’s Biggest Problems
Removing trade barriers is
over 30 times more effective
than any other intervention.
—Copenhagen Consensus
Why?
Wealth creation �is the fundamental driver�
of individual and social well-being.
How do you build wealth?
1. secure property rights2. efficient trade3. division of labor and specialization4. network size
1. Secure Property Rights
Two-thirds of the world’s population—four billion people—are locked out of the capitalist system.
Development is very complex. But if you do not have an order that tells you who owns what, none of the rest works.
—Hernando de Soto
2. Efficient Trade
A mere 0.1% reduction in transaction costsquadruples a country’s wealth—the difference between Argentinaand Switzerland.
Low transaction costs are the fundamental driver of economic growth.
3. Division of Labor and Specialization
… the basis for a rising productivity of labor and therefore a rising standard of living.
0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages
0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages
Fully 2.5 billion of the world’s adults don’t use formal banks or semiformal microfinance institutions to save or borrow money, our research finds. Nearly 2.2 billion of these unserved adults live in Africa, Asia, Latin America, and the Middle East. Unserved, however, does not mean unservable.
To read the full report, Half the World is Unbanked, visit sso.mckinsey.com/unbanked.
Counting the world’s unbanked
Alberto Chaia, Tony Goland, and Robert Schiff
Alberto Chaia is a principal in McKinsey’s Mexico City office, Tony Goland is a director in the Washington, DC, office, and Robert Schiff is a consultant in the New York office.
The microfinance movement, for example, has long helped expand credit use among the world’s poor—reaching more than 150 million clients in 2008 alone.1 Similarly, we find that of the approximately 1.2 billion adults in Africa, Asia, and the Middle East who use formal or semiformal credit or
savings products, about 800 million live on less than $5 a day. Large unserved populations represent opportunities for institutions that are able to offer an innovative range of high-quality, affordable financial products and ser- vices. Moreover, with the right financial education and support to make good
choices, lower-income consumers will benefit from credit, savings, insurance, and payments products that help them invest in economic opportunities, better manage their money, reduce risks, and plan for the future.
Sub-Saharan Africa 326 million adults
Middle East 136 million adults
Latin America 250 million adults
East Asia, Southeast Asia876 million adults
South Asia 612 million adults
Central Asia & Eastern Europe 193 million adults
High-income OECD countries60 million adults(Members of Organisation for Economic Co-operation and Development)
Percentage of total adult population who do not use formal or semiformal financial services
80%
67%65%
49%59%
58%8%
Total2,455 million adults
53%
0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages
Sub-Saharan Africa
Middle East
East Asia
South Asia
Adults who use formal or semiformal financial services, millions of adults
332 283
<$5/day >$5/day
396 45
56 25
4526
Yet serving adults who live on less than $5 a day is not only possible at scale—to a large degree, it is already happening.
Source: McKinsey research conducted in partnership with the Financial Access Initiative (a consortium of researchers at New York University, Harvard, Yale, and Innovations for Poverty Action); we relied on financial usage data from Patrick Honohan, “Cross-country variation in household access to financial services,” Journal of Banking & Finance, 2008, Volume 32, Number 11, pp. 2493–500.
The unbanked are not unservable
1 According to the Microcredit Summit Campaign, a leading advocacy group.
0–25% 26–50% 51–75% 76–100%
Percent of total adult population that do not use formal financial services
Estimates used to calculate regional averages
Adjusted for purchasing-power parity
4. Network Size
People-based systems�don’t scale beyond Dunbar’s number
Technology-based systems�scale virtually without limit
What if we could develop a
technology ��
that
• secures property rights• reduces trading costs• integrates people into the global economy?
CryptoFinance�uses digital signatures to
• secure property rights• reduce trading costs
• division of labor & specialization• economic network size
and thereby dramatically extends
CryptoFinance�
will catalyze
the greatest explosion of wealth creation the world has ever seen.�
15
CryptoFinance
Offers algorithmic security
Reduces need for human involvement & compliance
Results in cheaper and faster transactions
The CryptoFinance Ecosystem�• Blockchain technologies�
(e.g. Bitcoin)
• Off-blockchain technologies�(e.g. Monetas)
What are blockchains?
Decentralized consensus databases
How do blockchain transactions work?
Transfers of ownership recorded using�a consensus process
Vires in Numeris
Strength in Numbers
What are off-blockchain systems?
Decentralized transaction platforms
How do off-blockchain transactions work?
Transfers of ownership recorded using�a deterministic process
ON-chain andOFF-chain technologies
are complementary�
and synergistic�
Blockchain Advantages
ideal for:
! decentralized consensus! uncensorable records! public auditability
e.g. inflation-proof currencies,�
secure voting systems,�property registries, etc.
Blockchain Disadvantages
transactions are:
" slow" expensive" public
Off-chain Advantages
transactions are:
! fast! cheap! private
Ideal for retail transactions, micropayments,�
resource allocation, etc.
Off-chain Speed
1/100 th of a second
1,000 times faster than blockchains
Off-chain Cost�
1/10,000th of a cent
1,000,000 times cheaper than blockchains
Best of both worlds
Store assets securely on-chain�> asset layer
Trade assets efficiently off-chain�> transaction layer
The world's first global distribution platform:The mobile phone.�
�With cryptographically secure, decentralized
communication and trading systems,the mobile phone becomes the enabler of�
individual freedom and prosperity.
Radical Transformation of
Financial systemsCommunications systems
Production systemsGovernments and Legal systems
Explosion of Wealth creation�
The Age of CryptoFinanceA new era in human social evolution�
�PeaceFreedomProsperity