How COVID-19 Affects the Economy and How Blockchain Will Help Fix It
The article was prepared with the participation of
Amir Capital Group – ecosystems based on blockchain technologies.
COVID-19 has hit the global economy hard. Small and medium businesses were hit hardest, and many employees lost their jobs. Thus, in the United States, more than 22 million people have become unemployed. There have not been such high rates of unemployment since the Great Depression of the early 20th century. Many companies and the people who depend on them are helpless in the face of the impending threat.
The crisis created by the COVID-19 pandemic has allowed businesses and consumers to take a different look at blockchain technology and see the benefits it offers. Blockchain can accelerate post-crisis market recovery by addressing current economic challenges and bringing companies closer to digital transformation. In this article, we will explain how blockchain is being used to combat the impact of COVID-19 and how it is helping to restore the global economy.
Building supply chains
After the introduction of self-isolation to slow the spread of the disease, transport links were disrupted. First of all, this applies to cargo and passenger transportation. If the transport of people is in many cases not so justified, then a disruption in supply can lead to catastrophic consequences and economic collapse.
During such periods, chaos often occurs, which scammers can take advantage of. Customers cannot be sure that they are receiving certified drugs and properly manufactured protective equipment. Blockchain integration removes this ambiguity by providing users with open information about certification and product movement. The FDA program has launched several pilot blockchain projects to track drug shipments and verify drug origins.
Another issue is the accessibility of people to personal protective equipment. Many medical stores could not provide the required amount of protective equipment such as masks, gloves, antiseptics. According to analytical companies, the demand for masks exceeded 50 million pieces per day, while the supply was only 15 million. Manufacturers could not track “hot spots” that badly needed personal protective equipment (PPE). The blockchain would allow monitoring these points in real time and identifying them in a timely manner when new records appear in the blockchain about the need to obtain PPE. Suppliers could optimize and distribute transportation in a way that maintains balance.
Emergency and quarantine assistance
The forced isolation measures have caused permanent damage to many companies. Many offline retail outlets and services, such as non-grocery stores, cafes and caterers, cinemas, gyms and many others, have been forced to close by government orders. For large companies that sell a large part of their products through online stores, this did not pose a particular threat, although it should be borne in mind that the demand for all goods, except for essential goods, has fallen sharply. The situation was more acute in Russia: amid falling incomes and rising unemployment, the rates of foreign currencies, such as the dollar and the euro, increased, which further reduced purchasing power. This, in turn, also affects the functioning of the business. Even with an online store, it was difficult for small companies to survive in such conditions.
In order for companies to continue to function, they need to somehow get funding. The existing lending and business insurance procedures are a rather complicated and lengthy process, so some of the enterprises simply did not have time to receive the necessary support and were closed. In the context of lower refinancing rates, the same factor does not play in favor of the credit institutions themselves.
In this regard, China has bypassed other countries: since the end of January, the state has allocated more than $ 200 million to finance 87 companies that have joined the pilot blockchain financial platform. Henry Ma, CIO of WeBank, noted that blockchain fintech platforms play a big role in small and medium-sized enterprises, helping them to improve the efficiency and convenience of obtaining financial support.
Another blockchain platform, Xiang Hu Bao, pays compensation and also provides financial support to people and families affected by the effects of the coronavirus if they have been infected. Thanks to the distributed ledger, collecting, processing and paying victims takes much less time.
States have had to make remarkable efforts to trace contacts in order to identify infected people and points of infection. These measures require high-quality detailed information, which, moreover, must be delivered promptly so that it is possible to quickly monitor and take the necessary security measures. At the same time, it is necessary to ensure the confidentiality of personal data and their effective management, which the blockchain can perfectly cope with.
For example, the US launched the free Coalition app, with which users can quickly report in case they are sick or suspected of COVID-19. The application monitors the movement of users and notifies them if they could interact with an infected patient. The application uses Bluetooth technology with support for cryptographic security methods to track such contacts. The solution generates random identifiers that are stored locally on users’ devices, while the data itself remains anonymous, that is, other people learn about the very fact of possible contact with patients, but cannot know where and when it happened.
The crisis has shown that healthcare systems need effective technologies to timely track and control infections, deaths, recovery, PPE provision, vaccination research and development, and much more. The quality will increase due to the fact that blockchain allows tracking the supply and origin of goods, and the verification procedure will become much faster and easier, which is especially important in a difficult economic situation. In addition, it will reduce costs for companies and help them survive the crisis with the least loss, as well as quickly recover from it.