Blockchain and Economic Development: Hype vs. Reality

Increasing attention is being paid to the potential of blockchain technology to address long-standing challenges related to economic development. Blockchain proponents argue that it will expand opportunities for exchange and collaboration by reducing reliance on intermediaries and the frictions associated with them. The purpose of this paper is to provide a clear-eyed view of the technology’s potential in the context of development. In it, we focus on identifying the questions that development practitioners should be asking technologists, and challenges that innovators must address for the technology to meet its potential. In part I, we discuss what blockchain technology does, how it works, and hurdles to wider adoption. In part II, we examine its potential role in addressing four development challenges: (1) facilitating faster and cheaper international payments, (2) providing a secure digital infrastructure for verifying identity, (3) securing property rights, and (4) making aid disbursement more secure and transparent. We argue that, while blockchain-based solutions have the potential to increase efficiency and improve outcomes dramatically in some use cases and more marginally in others, the key constraints to addressing these challenges often fall outside the scope of technology—and that these constraints need to be resolved before blockchain technology can meet its full potential in this space.