The whole world has been in a huge crisis due to the Covid-19 pandemic in the past months. Businesses have closed and forced to shut down and employees have been impacted which causes them to lose their income.
Well known countries with strong economic back up such as the US, Japan, and Russia just to name a few, have spent hefty budget reserves to start helping their own people with cash assistance. With the Universal Basic Income, it is just for every citizen of the country to receive a certain amount regularly from their own government without any conditions and spending the said cash assistance at their own discretion.
The idea of Universal Basic Income has a downside wherein since the states are distributing money to all citizens, their people will work less and will affect the economy and it may also increase in the consumption of things that are not part of basic necessity. Some countries may find UBI a game-changer that helps their citizens to purchase goods that will provide them proper nutrition, basic education, and a decrease in crime rates. UBI has also lead people to have less anxiety with the idea of making money for food which helped them to find new areas of activity.
The solution of having cryptocurrency as a part of the Universal Basic Income will help to build an effective payment system at a very minimal cost. With this digital asset, producing them will be controlled by the central bank. Transferring cryptocurrency to electronic wallets of citizens will help control the cash flow within the system and block any suspicious transactions.
With this idea, any exchange can happen in real-time. Some people may also get the idea that digital wallets are not secured and may cause several fraudulent actions which can be avoided by doing an identification system such as KYC (Know Your Customer) verification.
With the transparency and automated process brought by smart contracts and technology behind the cryptosystem, many problems can be solved; the first thing would be the Inflation rate.
Originally the Universal Basic Income should monitor the change and how money makes changes in purchasing considering the actual consumer’s basket. This process is slow and would result in inaccurate data. To solve the first problem, cryptocurrency can collect all the information in an instant and will result in minimal to zero errors in the calculations. Blockchain will also provide the privilege to change the position of goods or services to monitor based on the actual number of consumptions of a country’s population.
Secondly, living standards. The original problem is the line between urbanization and agricultural areas has caused a lot of conflicts. In which, in the urban areas, goods are much higher the price rather than in the agricultural areas. Agricultural areas and workers are affected since they receive less amount than the citizens residing in urban areas. Cryptocurrency can definitely resolve this issue by the cost of goods being considered separately in each region and reduced to a common denominator through the conversion process rather than the traditional process of averaging. By that, people will have the same amount of goods and services regardless of their living standards.
Next on the list would be corruption. This is a common problem with countries and regions that has a weak law enforcement system. Since the Blockchain can hold the record of all the transactions, it is easier to track the path of the cryptocurrency from the moment it has been issued. This will definitely help the government to perform transparency that will leave no room for corruption.
Costs will also be reduced as the traditional framework financial system requires administration, regular and simultaneous settlements are difficult to handle and would be expensive. The cost of operations and the payment of staff that works with the information technology banking infrastructure.
Blockchain technology is a great solution to this issue as it automates the processes related to accounting, routing, cash charging, etc. The transaction cost would be much cheaper than the traditional payment infrastructure used. Having a digital wallet can be created through application programs that are free for the state and the public.
It is proposed that this can happen as the Covid-19 pandemic has changed a lot of traditional things that people are used to all around the globe. Cryptocurrencies can be an effective tool for the economic interaction between the state and its people for more equitable relations.