- Charles Hoskinson and Dan Larimer created digital assets that did not change value despite their demand.
- Initially, Tether went by RealCoin, and the US dollar-backed it, eventually stabilizing its value.
- Peter Mureu, Director of Marketing at Yellow Card, announced a recent feature incorporating USDC on the Solana Blockchain.
In the past decade, Africa’s economic growth has improved significantly through the adoption of new technology. The fourth industrial revolution has ushered in blockchain technology, AI, electric vehicles, and the metaverse. Through this uprising, technology Africa has found a way to embrace blockchain technology. Its flexibility has allowed developers and innovators within the continent to address several issues.
In addition, blockchain technology has led to one of the most significant achievements of the century, digital money. Africa’s crypto industry has significantly improved as it has provided an alternative means to deal with the economic instability of several countries.
Crypto trading and blockchain development is an upcoming career for most of the youth on the continent. In this era of financial empowerment, Africa has significantly embraced the power of stablecoins. Its stable value has trumped the adoption rate of several Altcoins and memecoins.
This article will highlight how stablecoins have managed to alleviate individuals from the economic instability affecting certain nations.
History of Stablecoins
The crypto industry first debuted in 2009 when Bitcoin first went online. The story afterward is pretty standard within the market. Developers found new ways to utilize the underlying blockchain technology to create alternative coins or Altcoins. This uprising led to the development of crypto titans like Ether, Sol token, and Cardano. The deeper developers understand the functionalities of blockchain technology, the broader the scale of altcoins.
This eventually led to the development of alternative consensus mechanisms, with each developer trying to outpace the original cryptocurrency. Unfortunately, all altcoins and Bitcoin shared a common flaw that deterred many from entering the market, high volatility. The shift between the demand and value became too unstable. With more users consistently flooding in caused plenty of issues for the developers.
For instance, the top three main altcoins are Ether, BNB, and XRP. Its high demand directly reflects its high value, but it also means other altcoins consistently struggle to maintain its value. Thus, Charles Hoskinson and Dan Larimer created digital assets that did not change value despite their demand. This drive and motive led to the creation of the first stablecoin in 2014, BitUSD.
In layman’s language, a stablecoin is a cryptocurrency whose value depends on a real-world asset like gold or fiat currency. At first, many within the crypto industry saw the creation of stablecoins as an attempt to integrate fiat currency into a blockchain network, but Charles disproved this concept.
Charles and Dan initially collateralized BitUSD by crypto and backed it up with BitShares core token called BTS. In addition, this stablecoin was also locked in a smart contract to act as collateral and managed to maintain its value for some period. Despite being the first digital money with a stable worth, since crypto backed it, BitUSD crashed in 2018, causing massive criticism within the industry.Alongside BitUSD, the crypto industry also received another stablecoin which the controversial Seigniorage system governed, NuBits. Unfortunately, because a stable currency did not back it up, it lost 94% of its value between 2016 and 2018. Both projects would ultimately fail but also shed light on the need for stablecoins, and their efforts would inspire the first successful stablecoins, Tether (USDT).
Initially, Tether went by RealCoin, and the US dollar-backed it, eventually stabilizing its value. Despite Tether facing numerous crypto lawsuits from the US regulatory body, it overcame every hurdle throughout the years and is currently the most used stablecoin in the crypto industry. Not only did it open new doors of possibility, it could later change the livelihood of millions of African houses.
Stablecoin Transforming African Homesteads
Africa’s crypto industry gained immense recognition in 2021 and 2022 after Emurgo Africa highlighted its 1200% surge in crypto adoption. Nigeria, Kenya, South Africa, and Egypt have dominated the market for some time now. Three out of four dominate the market, mainly due to the zealous nature of individual crypto traders. South Africa is mainly attributed to the intervention and support of its government.
Unfortunately, despite the growth of cryptocurrency, none have served the people more directly than stablecoins. John Colson, CMO of Yellow Card, said, “If we compare crypto adoption in Africa to the West, we notice distinct differences in customer needs and use patterns. In the West, cryptocurrencies are primarily used for investment and trading, whereas in Africa, they serve as a hedge against inflation and a means for cross-border payments. Many Africans seek stability, which stablecoins undoubtedly provide.”
Unfortunately, Africa’s economic instability has caused many individuals to rely on stablecoins to maintain some form of profit while trading and transacting funds. For instance, Nigeria has one of the highest trading volumes in Africa. The sheer volume and use of stablecoins is a testament to its economic instability. In 2000, 1 dollar was equivalent to N85, while today it’s N766, representing a 900% increase in two decades.Remember, Nigeria is among Africa’s big four, showcasing how dire the continent’s economic instability is. Today, most crypto traders in the Big Four perform day-to-day transactions through stablecoins due to their high value and low risk of instability. As a result, many African crypto exchanges have readily provided services to use this digital money. Its accessibility, fast transaction speed, and broader appliance have caused many to integrate Tether or any other stablecoins as a default feature.
For instance, Peter Mureu, Director of Marketing at Yellow Card, announced a recent feature incorporating USDC on the Solana Blockchain. He said, “We are excited to leverage the Solana network to bring the benefits of stablecoins and cryptocurrencies to African users. Solana’s network has played a pivotal role in driving stablecoin adoption across Africa with high transaction speeds while maintaining decentralization through innovative approaches. “
Currently, to transact with foreign businesses or clients, many African startups rely on stablecoins. In addition, it broadens the market space for any African business, making foreign shipments possible for even the youngest of startups. Furthermore, due to Africa’s economic instability, plenty of nations have experienced a significant decline in their fiat currency value. Many organizations have forgone transacting with fiat currency to USDT or any other high-value digital money to maintain profits.
The need for more
Stablecoins offer a wider range of possibilities compared to fiat currency. First and foremost, its decentralized network broadens Africa’s financial inclusion. According to Statista, at least 45% of Africa cannot access standard financial services. Despite the efforts of banks to promote fiat currency distributions, stablecoins operate at a much faster and more extensive rate.
In addition, thanks to blockchain technology, it provides low remittance services when dealing with cross-border transactions. This fact has aided millions in transporting money between regions. Sending money back home, or dealing with a foreign client, is made easier when compared to using Fiat currency.
Also, Read the Impact of stablecoins and CBDCs on Africa’s digital economy.
The rapid growth rate of Stablecoins has also significantly affected Africa’s crypto industry. Due to its high value and fast speeds, many who deal with stablecoins often find their way into other forms of digital money. This has aided in desensitizing Africa’s remote population towards a digital payment system. It has also inspired many to build their digital payment system to cater to the specific problems Africa’s economic instability has caused.
This very reason is also why several African governments have looked into enhancing monetary policies to cater to digital money systems. In addition, it also inspired many governments to forgo fiat currency and adopt a CBDC system. The concept of pegging digital money has grown, and currently, Nigeria has pioneered this movement through the E-Naira.
The success of stablecoins in Africa has inspired technological innovation and aided in overcoming various economic hurdles. Today, plenty of governments have urged their citizens to dive into blockchain technology as a means of improving their digital transformation.