While my previous post regarding the viability of cryptocurrency in Kenya (Cryptocurrency, is Kenya ready for Bitcoin payments?) generated a lot of positive buzz on the blog, I realised that save for a few techies, many of my readers found cryptocurrency to be an alien concept. This post serves to explain in the best way possible, what cryptocurrency is and how it relates to bitcoin. So here goes.
First off, what is cryptocurrency? Cryptocurrency is a digital currency that is decentralized from all other currency regulatory bodies such as the likes of the Central Bank of Kenya. In simple terms, it is a digital currency same as other currencies such as Ksh and USD, only that the currency is totally digital, and is created using principles of cryptography. Bitcoin, the first cryptocurrency was created in 2009 by an anonymous developer who goes by the pseudonym, Satoshi Nakamoto. Other cryptocurrencies have since come into existence since Bitcoin was launched. These other cryptocurrencies, which are commonly known as altcoins, include namecoin, litecoin and bytecoin. Although adoption of cryptocurrency across Africa hasn’t been very positive, the situation is most likely to change in the next couple of years for the following reasons.
The currency is largely decentralised, which basically means that its use is not regulated by a respective country’s central governments. Cryptocurrencies are also meant to decrease in production over time, meaning that they can only increase in value. For instance, Bitcoin will never have more than 21 million coins in circulation. This currency would be useful in countries such as Zimbabwe where the value of their local money is not worth the paper it is printed on.
The fact that cryptocurrency facilitates peer-to-peer transfer of money is one of the major reasons why cryptocurrency would best be suitable for African nations. A huge percentage of African nation do not have access to banking. With cryptocurrency mobile wallets and smartphones, more of the African population will have a semblance of mobile banking. Africa stands to benefit a lot from the adoption of cryptocurrency. An increased internet penetration has seen to it that there is an increase of Freelancers in the continent. Cryptocurrency will enable cross-border payment of freelancers, which will in the process enable them to enjoy cross-border employment and business opportunities without having to worry about how they will get paid. The fact that cryptocurrencies are decentralised means that one can transfer the coins without incurring any fees, making it a suitable option for peer to peer lending and transfer of funds.
As it currently stands, cryptocurrency is perfect for Africa. In fact, if one is to examine the benefits that people stand to get from the adoption of cryptocurrency, one would think that it was tailor-made for the continent. Governments should therefore keep up with the rest of the world by coming up with relevant legislature to regulate the use of cryptocurrencies.