Thursday, February 2, 2023
  • The potential of blockchain to produce and transfer value in society through cryptocurrencies will result in a generational transition in the Internet’s growth, from an Internet of Information to a new generation of an Internet of Value
  • Digital currencies, particularly bitcoin, are gaining traction in nations such as South Africa, Ghana, Kenya, Botswana, Zimbabwe, and Nigeria
  • High volatility and inexplicable drops, dangers of hacking attempts, and ransom with the resulting dramatic media stories are reasons why many investors still avoid cryptocurrencies and dismiss them as “magical internet money.”

Cryptocurrencies are progressively becoming more popular in Africa. Digital currencies, particularly bitcoin, are gaining traction in nations such as South Africa, Ghana, Kenya, Botswana, Zimbabwe, and Nigeria. Blockchain, also known as DLT (Distributed Ledger Technology), might be viewed as a solution to Africa’s current and future difficulties.

Blockchain technology and Cryptocurrencies

In 2009, Bitcoin became the first decentralized cryptocurrency. Cryptocurrency, which is based on blockchain technology, might be the engine for the African economy, fueling the continent’s tremendous leap ahead.

Cryptocurrencies are a subset of digital currencies, as well as virtual and alternative currencies. In recent years, cryptocurrency investment returns have vastly surpassed traditional assets such as global bonds and equities.

However, public perceptions and investor opinion of cryptocurrencies are varied, and it frequently boils down to a philosophical, if not emotional, dispute. This also applies to African policymakers’ official attitude toward cryptocurrency.

Read: Africans join the US$21.5 billion NFT party

High volatility and inexplicable drops, dangers of hacking attempts, and ransom with the resulting dramatic media stories are reasons why many investors still avoid cryptocurrencies and dismiss them as “magical internet money.”

The most common misconception among casual observers and certain government officials is that they support blockchain but oppose cryptocurrencies such as Bitcoin, Litecoin, and Ethereum, among others.

That argument is similar to those stated in 1994, before the launch of the Internet web browser, that they preferred a privately managed intra-net to the public censor-free Internet. Without a trustless and distributed consensus-based crypto-currency, a private blockchain is nothing more than a shared database or intranet.

Cryptocurrency supporters believe that blockchain will soon usher in a new era of the Internet that will be even more transformational and disruptive than the current one.

Cryptocurrency offers hope for Africa's economic resurgence. web3africa.news

Cryptocurrency offers hope for Africa’s economic resurgence.

The potential of blockchain to produce and transfer value in society through cryptocurrencies will result in a generational transition in the Internet’s growth, from an Internet of Information to a new generation an Internet of Value. Any government that adopts cryptocurrency would gain greatly from possessing the internet’s native currency.

Similarly, the disruptive potential of cryptocurrencies may be seen in the Internet of money. Cryptocurrencies will raze the banking sector as we know it, much as Netflix razed Hollywood, Spotify razed the music industry, and Facebook and Google razed the media and advertising industries.

Read: Raila and Ruto: In whose hands is crypto and blockchain safe?

Understanding the African cryptocurrency case

There is a strong possibility for Africans to bypass certain existing financial services, just as many Africans skipped the step of buying an expensive and cumbersome landline and moved straight to purchasing cell phones.

Traditional bankers in suits were the miners of the old generation in the “traditional” or “old” system; receiving paid-in the money from the central bank managed by unelected officials. That system is also defined by the mining of fiat currency by the fractional reserve banking system, bank bailouts, and high expenses to regular taxpayers, all while populism is on the increase.

Cryptographers are the new central bankers. The holders of cryptocurrency coins, which are or could be everyone, are the new proprietors of the financial infrastructure.

While cryptocurrency has been lauded for its potential in the developed world’s financial sector, one of its most important uses has gone mostly unnoticed. Virtual currency may provide hope in countries that lack solid economic systems or governance. Access to assets, financial security and privacy, and confidence in a common medium of trade may all help many people throughout the African continent.

Several African countries have crypto exchanges and start-ups, and their businesses recognize the value of cryptocurrencies in facilitating cross-border trade and payment. Furthermore, the infrastructure for the launch of digital tokens is stable.

Telecommunications deregulation across the continent has greatly increased Internet access. According to research data, half of Africa’s population has access to mobile phone services. Smartphone usage in sub-Saharan Africa reached 495 million.

The new financial sector will decide where the innovation for cryptocurrency smart and contracts will take place. It is Silicon Valley’s replacement for the old financial infrastructure, as well as Africa’s opportunity to leapfrog the old system. It will position African economies strategically

for the future of finance. Africa’s lack of a solid legacy system, as opposed to the developed world, is now a huge advantage.

Even still, far too many adult Africans remain unbanked. This dreadful condition deprives numerous people of financial independence. Bureaucratic tenors, among other things, have paved the path for this predicament.

African countries have fallen behind in traditional banking, but the amazing success of Kenya’s Safaricom M-Pesa demonstrates that this is and may be an advantage in the emerging blockchain economy. Safaricom’s success demonstrates that Microsoft co-founder Bill Gates’ aphorism “Banking as a function is required, banks are NOT” is correct. What Safaricom’s M-Pesa accomplished on a national scale, cryptocurrency can accomplish on a pan-African scale.

In Africa, cryptocurrency remittance businesses have emerged as an alternative to Western Union, and international organizations have used blockchain technology to help refugees. Nonetheless, it appears that many of the areas that are most in need of this innovation have yet to accept the monetary sanctuary. The widespread use of cryptocurrency in Africa would contribute to the democratization of financial services.

Kazakhstan became the world’s second country, after Japan, to identify the necessity for governmental growth of the cryptocurrency market system. The development of the digital currency market, based on the Astana International Financial Centre, is the first step toward the establishment of a fully-fledged digital economy ecosystem. Forward-thinking African nations should aim to emulate the advances in Japan and Kazakhstan.

Evolution of cryptocurrency practices aids adoption growth in Africa

Widespread cryptocurrency acceptance and adoption in Africa remains delayed. Countries with strong inflation and currency regulations appear to be concerned about cryptocurrency’s development.

However, countries like Singapore and Switzerland are both prosperous countries with strong currencies, so they have nothing to lose by adopting cryptocurrencies and financial technology. However, as with the Internet, cryptocurrency is difficult to govern and/or prohibit.

Adoption of cryptocurrency suggests that it will be somewhat recognized as legal tender all around the world, a totally decentralized resource capable of safely transferring and storing value. Africa is trailing behind in this aim owing to a lack of legislation, a lack of confidence and trust, key regulatory organizations prohibiting digital currencies, and a lack of crypto education.

More than ten crypto exchanges have recently emerged in the African market, aiming to provide affordable and efficient trading services to African consumers. Some exchanges have expanded their services and opened an office in Africa to serve the new market and monitor crypto demand in many African nations.

Local entrepreneurs in East Africa have built cryptocurrency systems to allow cross-border transactions, as demonstrated by efforts such as BitPesa. Cryptocurrencies are getting increasingly popular in South Africa. Local businessmen and campaigners in Nigeria feel the new currency represents the potential to democratize the economy. This is motivated by the fact that traditional money has failed Nigerians.

While many exchanges accept traditional payment methods such as bank transfers and account top-ups, a few platforms, such as BTCGhana, provide easier means of acquiring and selling cryptocurrencies to local users and the unbanked populace.

Users on the BTCGhana platform may acquire crypto using established exchange platforms and transmit the money to local remittance platforms such as MTN Mobile Money, Airtel Money, and TigoCash within minutes. This service enables African consumers to easily obtain cash from local remittance stores without having to cope with complicated withdrawal and deposit techniques.

A look into the future of cryptocurrency in Africa

Africa has a lot to offer cryptocurrencies simply because Africa requires an alternative to the weak and not–always–available nor dependable local African fiat money. If cryptocurrencies are marketed in Africa, all of their products will be favorably received. In Africa, there is a clear need for alternate payment methods.

Cryptocurrency is more than simply a solution to the “unbanked” problem. It is, rather, a technique of empowering economically or politically oppressed groups to govern their own riches. Non-fiat digital money has the potential to bring millions of people into a safe, person-driven global economy.

All people, particularly the poor, require a means to preserve access to their riches from wherever in the globe. Consider the possibility that a refugee may open a bank account even after being relocated from their native country. This might help refugees keep their dignity while also reducing the tremendous poverty produced by this horrible upheaval. This is the virtual currency’s untapped potential. In countries where political activists are imprisoned or inflation is widespread, non-fiat virtual currencies may provide an escape route.

For the first time, open-minded early adopters may place a Silicon Valley-style bet on the future of banking and money, as well as the growth of African economies. Cryptocurrencies, like any other investment, have risks. However, not owning or adopting the Internet’s native currency is much more dangerous.

Cryptocurrency is a complicated, fast-evolving phenomenon that will have a significant influence on power distribution in the global economy and on the African continent.

Because digital currencies are invisible, a government cannot physically take a citizen’s money. This paradigm change represents a significant step forward in the social contract, giving individuals an additional degree of security.

 

Read: The fall of bitcoin adoption in the Central African Republic

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