- Access to inexpensive financial services enabled by blockchain technology becomes a driving force for economic growth and sustainability.
- The use of blockchain technology opens the door to new possibilities for society’s organization.
- After recognizing the great potential of cryptocurrency, its significance will almost certainly expand.
Blockchain clears the way for financial inclusion in Africa
In today’s world of fast digitization and globalization, technological advancement in Africa has reached such a point that the use of cryptocurrencies is no longer a novel phenomenon.
Blockchain technology enables financial services on the internet by rethinking trust, transparency, and financial inclusion with transparency incorporated into a decentralized network.
Thus, blockchain has the potential to contribute to the achievement of the United Nations’ Sustainable Development Goals (SDG) by empowering the unbanked in Africa, particularly women, lowering transaction fees, and providing an alternative source of liquidity.
In 2022, just 48% of individuals in Africa will have access to a bank account. Because they cannot afford to participate in the official financial system, the poor pay the most for essential financial services. Furthermore, economic involvement by women has a multiplier impact that has far-reaching effects in terms of several SDGs.
Financial inclusion may reduce poverty, increase health and well-being, promote gender equality, and improve children’s education, among other things. Access to inexpensive financial services enabled by blockchain technology becomes a driving force for economic growth and sustainability.
The wave of digital transformation in Africa toward blockchain technology
Several waves of economic and societal change have occurred recently due to advances made possible by digital technology. Digital technologies are at a tipping point in Africa right now. Most of the advantages of having easy access to computing power have been restricted to the private sector until recently. The primary goal of information technology (IT) was to accelerate, improve, and secure the same business processes that had been in place since the 1950s.
However, something changed with the widespread diffusion of computing power worldwide. Computational capacity distribution is driving several innovations that fundamentally alter how corporate operations, the economy, and society are defined. As a result, the distribution of digital power has had a profound effect on every element of human life.
Digitalization of various commercial operations has taken place in Africa and large-scale data collection. Over 45% of the continent’s population now has access to computing power, thanks to this revolution’s success in fueling the mobile phone revolution.
The global dispersion of processing power has made technologies like blockchain possible. Cryptocurrency transactions can be timestamped and recorded on the digital ledger blockchain.
Since its inception, blockchain technology has proven helpful for various purposes. The uses range from encouraging the use of renewable energy in energy networks, thereby lowering greenhouse gas emissions in the global shipping sector, to allowing banks to process remittances more quickly and at a cheaper cost.
Blockchain is still in its infancy and will take many iterations before its proper incorporation into the African social fabric. The internet of things, mobile telephony, and even the internet have followed similar paths in the technology business. All of those technologies had to endure several iterations before they were adopted by society as a whole.
Numerous challenges must be slowly and steadily addressed in technology, society, and politics. As a result, it is frequently beneficial to approach new technologies with some depth of thought—not as a completely working answer, but rather as a lens on the possibility.
It is possible to have an open debate in which individuals may confront their preconceptions if they use this method of communication. Research has already shown that a network of folks with access to the internet and a lot of processing power may be pretty powerful. They can do far more than a just tweet or post a photo or video; these individuals can develop and sustain an entirely new economic system.
As a result, blockchain’s strength is not in the technology itself but in how it has reframed a wide range of modern-day topics. The use of blockchain technology opens the door to new possibilities for society’s organization.Read: Cryptocurrency offers hope for Africa’s economic resurgence
Blockchain charts the way for sustainable development in Africa
The blockchain’s incorruptibility and lack of intermediaries may aid in better serving the unbanked. This attribute might also contribute to diversifying the previously bank-dominated financial services sector.
Blockchain-based cryptocurrencies might perform all (and more) that financial institutions can do, but without a third-party managing user data or charging astronomical fees for essential services.
More than a decade since the first Bitcoin (BTC) creation, it has not yet achieved widespread consumer adoption despite its capabilities. However, research indicates that cryptocurrencies have a strong potential to gain traction and enhance the financial services business, particularly if they become easier to use, more stable, and accepted by retailers for daily transactions.
There exists an obvious indication that individuals lack the understanding necessary to conduct bitcoin transactions (not only in Africa, as other surveys show). Indeed, it takes significant time for individuals to comprehend blockchain technology.
The apparent lack of trust feeds on ignorance, hindering crypto’s acceptance; the negative portrayal of this financial instrument by the majority of the media also does not help.
Perception is a vicious loop that cannot be broken without an easy-to-use financial solution that both individuals and store owners can utilize. As soon as such a platform is constructed on an existing infrastructure that many Africans are acquainted with, this loop may be broken, and bitcoin adoption may accelerate.
While this acceleration does not imply the replacement of other financial instruments, it would diversify the financial services industry and involve persons excluded from traditional finance.
Notably, the price volatility of certain cryptocurrencies can be mitigated using stablecoins. Stablecoins are cryptocurrencies tied to fiat — i.e. government-backed currencies or valuable commodities like gold. While detractors are quick to point out that these currencies are no longer decentralized since, in terms of cash, their value is strongly dependent on the success of the currency they mirror, it is clear that these coins are here to stay. Several businesses in the cryptocurrency industry have developed relatively decentralized stablecoins.
In addition, more than seventy nations are striving to create digital versions of their national currencies. Central bank digital currencies (CBDC) are the digital counterpart of the national currencies issued by central banks.
CBDCs can bolster consumer safeguards and establish a regulatory framework, including fiscal and monetary policy, for a substantial portion of the financial sector that has generally escaped authorities to date.
Disadvantages: The “tamper-proof” quality of decentralized finance would be lost since users would have no option but to let go of some degree of privacy and control, and central banks would be empowered with unfathomable power to date back transactions, reverse them, etc. It is an excellent chance for the authoritarian government type that desires to consolidate its control over financial transactions and individuals. Therefore, cryptocurrencies and blockchain technology may be a liberty medium or be abused for dystopian ends.
On the other side, by offering an essential infrastructure for launching crypto, CBDCs coupled with a user-friendly platform might serve as the beginning point and entry point for individuals to learn about cryptocurrency and gain power. People may now feel inspired to explore the bitcoin universe, develop their financial literacy, and migrate their funds to decentralized alternatives.
Lessons from El Salvador might promote financial inclusion through cryptocurrency in African nations. CBDCs may be one method for fostering trust, promoting financial inclusion, and accelerating crypto adoption. After recognizing the great potential of cryptocurrency, its significance will almost certainly expand.
Since those in authority have a vested interest in maintaining the status quo, the length of time necessary for blockchain technology to achieve traction is still cause for concern. Nevertheless, in light of the crypto tidal wave sweeping the continent, Africa will adopt blockchain technology faster than the transition from cowrie shells to fiat currency. Consequently, this newly discovered technology will be essential for Africa’s sustainable development.