A brief introduction to Bitcoin
Since Bitcoin was first created in 2009 by the pseudonymous Satoshi Nakamoto (now widely believed to be Australian entrepreneur Craig Wright) via a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”, the cryptocurrency has become an increasingly popular — and valuable — alternative to fiat currencies.
Operating on a peer-to-peer basis and free to use, Bitcoin is not subject to state regulation nor central banking control, and although Japan has recognized it as a legal payment method, Bitcoin and other cryptocurrencies remain outside of the regulatory space.
However, Bitcoin is undoubtedly gaining more widespread mainstream acceptance, as evidenced by the staggering increase in its value in 2017. Trading at around USD$1,000 at the beginning of the year, it broke through the USD$5,000 barrier for the first time in September, before reaching a high of over USD$17,350 in December 2017. Despite some sharp corrections in late November, this inexorable rise looks set to continue.
And while the uptake of Bitcoin has to date largely taken place in developed economies, there is a strong argument for seeing it as a means of bringing real economic growth, as well as greater autonomy and financial democracy, to many countries in Africa where the use of Bitcoin is now also on the rise.
The growing use of Bitcoin in Africa
In Africa, Bitcoin is being utilized for a range of different purposes, with many observers taking the view that it could bring real economic accessibility, democracy and freedom to millions of people in a way that fiat currencies are unable to do.
One of the reasons for Bitcoin’s growing presence and importance in African countries such as Nigeria, Kenya and Ghana are that it facilitates fast and cost-effective remittance transfers, upon which so many individuals in these countries, not to mention their overall economies, depend. The speed and efficiency of the Bitcoin network means that money transfers are completed more quickly and more cheaply, ultimately resulting in more money making its way to the end-user’s pocket.
The process of peer-to-peer transfers using bitcoins has also been made easier by the fact that it is now possible to sell bitcoins via an exchange and have the proceeds transferred to a PayPal account, while e-wallets like Skrill and Neteller can also be funded with bitcoins directly.
The ability to transfer funds to PayPal or an e-wallet means that bitcoins have become a more viable option for those with limited access to financial instruments to receive and access money, This is especially the case as payment systems become even more widespread and can be used for more and more retail, commerce and entertainment options, such as these sites that accept PayPal.
Bitcoin is also becoming a tool for business in a number of African countries, such as Kenya, Nigeria, Uganda, and Tanzania, with locally-based start-ups creating bitcoin-based lending platforms, thereby eliminating the need for banks and making cross-border lending quicker and more affordable.
Through a combination of the bitcoin blockchain and mobile technology, it is becoming increasingly possible for African small business owners not only to gain investment from all over the world, but also to be able to access these funds quickly through a mobile phone and using locally-based remittance platforms.
Bitcoin is also becoming more of a part of everyday life in Africa. For instance, Pick n Pay, one of South Africa’s largest retail outlets, is enabling customers to use bitcoins in its stores, while bitcoins can also be used in the country’s largest online marketplace, Bidorbuy. There is also an ATM in Johannesburg that accepts rand in exchange for bitcoins, while Nigerian e-commerce startup Shopnow.ng also accepts bitcoins, and has a mobile app that also enables online shopping with bitcoins on the go.
These are, however, just a few of the thousands of enterprises in Africa that accept and facilitate trading in bitcoins, and entrepreneurs elsewhere in Africa are also seeking to widen the use and take-up of bitcoins and the use of blockchain technologies.
For instance, Bitcoin marketplaces are being developed in Botswana and it is expected that ATMs will be available in the country soon; Ghana is seeing new electronic payment systems being developed that accept bitcoins and other cryptocurrencies; Kenyan startups are advising new companies on how they can effectively employ blockchain technologies, while new remittance companies are springing up in Nairobi with the aim of making B2B money transfers more affordable; and new companies in Zimbabwe are developing their own mobile wallets and bitcoin-based remittance services.
International companies too have understood the growing importance of Bitcoin in Africa and a number of new tech enterprises are being developed that have an African focus, such as a bitcoin mobile phone top-up services and peer-to-peer marketplaces, as well as new digital currencies such as Kobocoin that have been created specifically for the African remittances market.
The Bitcoin trading industry in Africa
An indication of the status and growing accessibility of Bitcoin in Africa is the number of exchanges that are now in operation for the trading of bitcoins. There are local companies, such as BitPaya, Luno, BitcoinFundi, ice3x and NairaEx as well as international brands like BitStamp and Kraken, operating in this space who enable customers to buy and sell not only bitcoins, but other cryptocurrencies as well, including Litecoin and Etheruem.
The focus of African exchanges tends to be speed, transparency and mobile accessibility, with the emphasis currently on peer-to-peer exchange, although that is changing and African Bitcoin exchanges are seeing greater volumes of trades as more people look upon cryptocurrencies as an investment instrument, not just a tool for facilitating payments and remittances.
Part of the reason for the growing acceptance of Bitcoin in Africa is the fact that it is unregulated by central banks and governments and so in a continent that is largely underbanked and whose various economies have too often been beset by inflation (think of Zimbabwe in 2008), Bitcoin is seen as providing an alternative solution to both.
The fact that peer-to-peer lending and remittances have become easier and cheaper through the use of blockchain technology also goes some way to explaining Bitcoin’s uptake, and is also why analysts predict that it will only become more mainstream as people gain a greater understanding of how it works and the benefits it can bring in countries where the adoption of mobile technology is booming.
What influenced the growth of the use of Bitcoin and Bitcoin trading in Africa market
Aside from being peer-to-peer based and therefore out of the control of central banks and governments (thus resulting in greater transparency and less subject to inflationary pressures), mobile technology is the primary reason why Bitcoin use and trading has begun to get a foothold in Africa.
Although per capita use of mobile phones remains lower than most other places in the world, it is nevertheless growing more rapidly in Arica than anywhere else, and this has opened up opportunities in retail, commerce and entertainment that have been denied previous generations. In many parts of Africa, a mobile device is the only way of connecting to the internet, and so through being entirely digital, Bitcoin has the potential to become a genuine alternative way of doing business for millions of people all over the continent.
This is because technological developments have meant that payments, purchases and remittances can now be accomplished through mobile devices without the need for conventional banking infrastructure or any physical currency. Small business owners can process their payments and customers can buy goods using their mobile phones using services like PayPal, Android Pay and, increasingly, cryptocurrencies.
And as confidence has grown in the technology and the security of cashless payment systems, so has the popularity of Bitcoin, as consumers and investors alike have seen the potential of these new technologies and systems working together. When combined with the fact that hundreds of millions of people in Africa have no access to traditional banking facilities, it is not unsurprising that the alternative offered by Bitcoin is an attractive one.
What does the future hold for the Bitcoin use and trade in Africa?
Ultimately, the future success of Bitcoin, in Africa at least, will be dependent on both continued rapid rates of mobile phone usage, and the currency’s continued freedom from state regulation and banking controls (although African governments, most notably South Africa, are increasingly looking into creating their own cryptocurrencies).
With an estimated 535 million mobile phone service subscribers in Africa by 2020, and over 60% of these users having a broadband connection, it would seem clear that the role mobile telecommunications play in almost every aspect of daily life is only going to increase. When this is combined with the fact that 280 million people in sub-Saharan Africa already have mobile money wallets and so are comfortable with this method of doing business, it is not hard to envisage rates of Bitcoin adoption similarly increasing.
This existing reliance on mobile payment systems should also prove an incentive for developers and entrepreneurs. Millions of Africans have already demonstrated their willingness to use mobile payment and banking technologies, and so with the right encouragement and education, and Bitcoin applications that respond to the specific needs of those in sub-Saharan countries and remote regions, there is seemingly unlimited potential for growth.