During the 2007-2008 financial crisis, an anonymous figure Satoshi Nakamoto built a white paper on the blockchain and called it Bitcoin. The white paper attracted an investor community since it imagined the development of a universal currency, free from central banks’ regulations. Nakamoto’s white paper imagined a Digital currency that is decentralized where no financial intermediaries, such as banks serve as middlemen.
While Bitcoin grew in popularity it led to prominence in Blockchain technology. This rise led to many innovations in blockchain technology as it gained attention across several industries.
Bitcoin aims to ensure financial freedom, a decentralized financial system and immutability. Bitcoin is a decentralized digital currency, without a centralized administrator or regulator that can be sent from one user to another on the peer-to-peer platforms without the need for intermediaries. These three characteristics of Bitcoin are a poof that it’s ‘built for Africa’
“Africa needs Bitcoin, it’s the continent’s path to freedom,” Ray Youssef, Paxful CEO.
Transparency
We recently witnessed Canadian truckers being barred from accessing donations made towards their protests and later the bank accounts of the donors frozen. A while before that we witnessed Nigeria do the same for the #EndSARS protestors. The financial exclusion does not start and end with those two since governments and traditional financial institutions have been weaponizing Bitcoin for years and linking it to illegal trade and criminal activities. The situation is worse in Africa where we have analogue regimes and powerful people opposed to Digital currency.
In Kenya for example, it has become the norm for financial records to go missing during an audit. In some instances, we have experienced cases of fire breaking out in offices where these documents were supposedly stored. Corruption is a menace and identifying loopholes where the funds are lost seem an impossible task for the authorities.
Blockchain is immutable and all transactions are documented, validated and verified transparently on a public network. Transactions are final and cannot be altered or reversed. This characteristic of blockchain is one of the reasons why it should be adopted as a legal ledger across Africa and will massively benefit Africa.
Currency Devaluation
Inflation is a big problem for most economies worldwide. Furthermore, most countries experience currency devaluation. For instance, the Kenyan Shilling has depreciated from KES 67 a dollar in 2007 to all-time highs of KES 114 in 2022.
Other African countries such as Nigeria, Zimbabwe and many more are even worse. The value of Bitcoin over the same period has grown exponentially and those who invested achieved financial freedom.
Bitcoin is not the alternative hedge against inflation since it is still very volatile. However, there are stable coins such as USDT, DAI and BUSD which exchange 1:1 with the dollar. You can convert your money into such coins to hedge its value especially when there are uncertainties during an election year like the case now for Kenya.
Diaspora Remittances
Kenya has recorded an increase in the diaspora remittances from $574m per year in 2007 to $3b in 2021.
The cost of transactions and the time taken to transfer money across borders have a pinching effect on senders. Africa can leverage on Bitcoin or stablecoins such as USDT for cross border remittances to bring down the cost of even larger transactions around 2.5% or below and the time spent to less than 10 minutes. This solves the challenges experienced currently when remitting funds to African countries.
“By using Bitcoin for cross border remittances, we significantly bring down the cost taken and that makes Bitcoin a social tool.” Jack Dorsey, Former Twitter CEO.
Freelancers
Freelancers and remote-based developers, designers, academic writers among others have been frustrated by legacy financial service providers when receiving payments from foreign clients. Their accounts are frozen for 180 days or permanently suspended without verifications of transactions or explanations causing inconveniences to many. This is just sad.
Bitcoin solves this censorship and financial exclusion as users can quickly exchange to cash and withdraw to their preferred fiat gateway when they receive payments in cryptocurrencies.
“I just prefer to be paid in crypto, the other platforms are either too expensive or you live in fear of your account being frozen,” Bill Onare, Software Developer.
Peer to Peer Trading
Numerous reports released in 2020 and 2021 are evidence that the value of p2p cryptocurrency transactions has exponentially grown in Kenya and Africa at large. Even though legacy financial systems have failed to support cryptocurrency transactions, the popularity of Bitcoin in Africa and other cryptocurrencies has grown.
Young and innovative Africans who have been failed by their governments to create jobs are using ‘p2p trading’ as a way to create jobs for themselves and generate some income. Simply they sell cryptocurrency at higher margins than they buy at (arbitrage) and also take part in trading, yield farming, staking and other ways to earn in this crypto space.
Decentralized Finance (DeFi)
DeFi has removed the barriers of entry for investors and access to financial services by making trading, insurance, lending and borrowing etc. available at the comfort of your smartphone and you can invest as low as $5.
NFTs have given African creators a platform to access a larger market for their art.
The rise of blockchain technology can be attributed to Satoshi’s development of Bitcoin to the earliest cryptocurrency exchanges originating from Asia and the west. There are those who deem blockchain as a technology of the west but I really do believe this technology is made for Africa as it solves so many financial problems we face every day.
Related:
Innovations on Blockchain Technology and Crypto Currencies