Empowering Women: Financial Freedom and Control in Bitcoin’s Multi-Signature Technology

This article was originally posted March 8th, 2015. Written by Pamela Morgan, published through the Digital Currency Counsel website.

Several studies show that cooperative organizations empowerwomen in the developing world, especially in farming, textiles and crafts. While the structure of a co-op can bring women together, they often face significant legal and cultural barriers preventing them from exercising independent control of the co-op’s finances. Bitcoin’s multi-signature capability could increase economic inclusion for women, offer financial independence and distributed control over a co-op’s funds. Bitcoin essentially allows women to co-own as much as co-op.

Imagine a weaving cooperative, in Pakistan, where twelve women pool their resources to make scarves and sell them to tourists. While technically each of the women may have equal power within the cooperative, only one or two will control the money. However, concentrating financial power in a few select people is antithetical to the nature of cooperatives and it’s dangerous to the organization. In the past, we had no choice but to entrust a few to manage money for the many. Now there is another way.

Bitcoin can distribute financial control to the entire cooperative, through multi-signature addresses. Today, we most often think of multi-signature addresses in a 2-of-3 configuration, where the third signer is for escrow or backup. But multi-sig can have up to 15 signers per address, making it an ideal way to distribute financial control in a co-op. For example, the 12 member weaving co-op could use a 7-of-12 multi-signature to reflect majority rules in its financial management. If seven women signed the transaction it would be processed. If not, the transaction would be invalid. This configuration helps to protect the entire co-op from coercion by male relatives, who might use their cultural dominance to raid the co-ops funds. It also protects against theft, embezzlement and lost keys.

Traditional banks simply cannot offer the same protections as a bitcoin multi-signature address. Financial inclusion, although a worthy goal, is not a reality for all. Women may be treated differently, by law, by custom or both. Sometimes women are prohibited from opening bank accounts. Sometimes women are required to obtain permission of male relatives in order to open a bank account. Some jurisdictions attempt to hide inequality by allowing a woman to open an account in her own name name but vesting all decision-making power in a man.

Even if a woman can open an account without male permission or oversight, and the bank promises to protect the funds, how strong is that promise in a male-dominated culture? A male relative could expropriate the funds by colluding with the bank manager, pretending he had authorization to withdraw, or coercing one woman to withdraw all of the funds. Once the funds are gone, the female owners would likely have very little recourse. Whether due to legal gender inequality or simply lacking the resources to fight, it’s unlikely “lost” funds would be recovered. Cash is even more vulnerable to loss or theft, but is often the only available option. While bitcoin is still not mature enough to deploy in many developing countries and complex multi-signature design experts are few, both are developing at a rapid pace. Traditional banking services, in the most flattering light, still cannot compete. Bitcoin offers the possibility of distributed control through technical guarantees that are both independent and culture neutral.

As bitcoin matures, it’s likely that even larger and more complex multi-signature configurations will be possible. While we don’t yet know if the costs of coordination are sufficiently reduced by the innovation, if they are then massive multi-signature could allow unprecedented diffusion of power. Multi-signature technology may allow economic control to scale in parallel with organization size. For example, direct democracy could scale to the size of a small labor union, with worker members controlling a 201-of-400 majority-rule budget.

Women around the world are coming together to produce community goods and services. Bitcoin allows them to cooperatively manage money as well. Multi-signature addresses with up to 15 signers can allow members of a small co-op to democratize financial decision-making. Whereas banks and cash present significant risks, leaving women without recourse and vulnerable to coercion, bitcoin multi-sig technology remains neutral despite cultural or national barriers. Although it’s still too early to tell how this technology will mature and be applied, bitcoin could be a catalyst for real change. Bitcoin, with multi-signature protections, could become a powerful financial inclusion tool to empower women everywhere.

This post was written by Pamela Morgan.  Learn more about Pamela at EmpoweredLaw.com