Coronavirus Financial Panic.
The last month since the COVID-19 outbreak unfolded in the United States has been tumultuous to say the least. As a bright point among the tragic events, we have seen several very positive stories in which large companies bring their best efforts forward, and crypto startups come up with ideas and suggestions for how to tackle the pandemic spread using decentralization and blockchain. Most of the new initiatives are around data integrity, prediction and reporting, and while such efforts are highly admirable and needed, we also must be cognizant and distinguish how many of these proposals are actually feasible, realistic and not only marketing headlines for generating clicks.
In data science we always struggle to ensure that our input data is of high quality, and in the COVID-19 case, the aforementioned systems are off to a bad start as all of the publicly available data was coming out of China. While China is pretty advanced in planning and efficient in executing its own digitalization strategy and Digital Currency Electronic Payment (DC/EP) initiative, it has come out that the nation had a different agenda than revealing the true size and scale of the pandemic. Thus, the patient and disease data they presented to the Western countries consisted of underreported or just fake numbers, and several country leaders have already expressed their disappointment with that fact. Indeed, the “garbage in, garbage out” scenario is the main issue with applying blockchain technology in such cases.
So, what can actually be done in order to help alleviate a global pandemic crisis and the forthcoming recession?
There are no two ways around it: 2020 will be remembered as a turning point in the use of technology and improving our technical capabilities and creativity. Almost every company and individual is faced with the opportunity to change and adapt or be left behind as nothing will be the same again after we restart the global economy, hopefully in few months. We are seeing an increase in usage of artificial intelligence and machine-learning concepts alongside blockchain and Internet of Things (IoT) in order to create better and more efficient applications and services.
As mentioned earlier, blockchain is not the solution when we’re dealing with weak and inaccurate data as there is no point in making it immutable, but the technology presents a lot of benefits in payments, loans origination, digital identities, trace and tracking solutions, and supply chains, as noted in the latest World Economic Forum (WEF) report on COVID-19 impact.
Focusing on payments and payment-related services will turn out to be the winning recipe for success when navigating the impending recession. As we saw earlier this month, even the notion of a digital dollar made its way (and later was removed) into new Senate and Congress bills. Digitalizing the U.S. dollar is not a new initiative but it recently picked up steam again as a faster and more efficient way to distribute cash at scale and making sure freelancers and working-from-home cashless workers are paid in time. Note that this will not replace the cash banknotes but will complement the issuance and distribution of funds. The benefits for retail and wholesale CBDCs transactions are around security, flexibility and transparency, while international payment rails will benefit from regulatory-friendly and compliant infrastructure. Other countries like South Korea, Sweden with the e-Krona and Japan are pretty advanced in issuing central bank digital currencies (CBDCs). Even the Bank for International Settlements (BIS) has come out with a bulletin focused on the future of cash and payments, pointing out that coronavirus could be transmitted by cash. While such claims are highly debatable, we can see from the below chart that central banks are on both ends of the spectrum, either trying to bring trust in cash bills or urging for alternative contactless payment methods.
Central banks response over the number of cases
Interestingly, here in the U.S. we saw the largest weekly increase in banknotes in circulation since December 1999 when people were panicking over the Y2K bug:
Race to US paper money
Another use case for enterprise blockchain technology will be in managing digital identities while countries are producing track-and-trace-type applications for preventing the pandemic from spreading. Similar apps have worked with good success already in South Korea and the U. S. is taking a similar approach and tracking GPS data, credit card swipes and smartphone location data, and checking if your path has intersected with that of an infected person. This, in parallel with the new breed of healthcare apps for the tracking of pre-existing health conditions, will provide a stronger base for facing a similar pandemic, if one happens in the future.
Overall, we are faced with completely new conditions to deal with due to the COVID-19 pandemic that took the world by surprise. In those new environments we need to implement solutions quickly and on scale. Problems that we never before thought existed, like how to safely distribute money and financial aid to people safely, are now knocking at our doors and need immediate attention. In such an environment, blockchain is not the only solution that we are leveraging, but is being used alongside AI/ML in order to bring sufficient visibility and predictability to COVID-19 spreading and prevention.
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