What actually is Cryptocurrency?

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 explains, in the best way possible, what cryptocurrency is and how it relates to bitcoin.

what is cryptocurrency?

Cryptocurrency is a digital currency decentralized from all other currency regulatory bodies, such as 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 created using cryptography principles.

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 the adoption of cryptocurrency across Africa hasn’t been very positive, the situation will most likely change in the next couple of years for the following reasons:

The currency is largely decentralised, which basically means that a respective country’s central government does not regulate its use. 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 printed paper.

The fact that cryptocurrency facilitates the peer-to-peer transfer of money is one of the major reasons cryptocurrency would best suit African nations. A huge percentage of African nations 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.

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 funds transfer.

As it currently stands, cryptocurrency is perfect for Africa. In fact, if one is to examine the benefits people stand to get from adopting 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 legislation to regulate the use of cryptocurrencies.