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Africa Getting on the Bitcoin Bandwagon

25 March, 2014

Source: ICT Africa

 
Kihara Kimachia

Since human beings began trading, the medium of exchange or currency as we better know it today has gone through interesting evolutionary stages. In antiquity, barter trade was the norm. This was later replaced with currency in the form of gold, silver or bronze coins and later with bank notes. The most recent developed in the history of money is digital currency.
The biggest change in this regard was the emergence of the first cryptocurrency, bitcoin, in 2009.

Understanding Cryptocurrencies
Cryptocurrency is a form of digital money - any currency electronically stored or created. Money held in bank computers is considered a form of digital currency though this is not the common usage of the term, Cryptocurrency goes a step further by using cryptography to create and control the supply of money. Cryptography refers to a series of techniques that allow secure communication in the presence of third parties.
There are now over 60 cryptocurrencies trading online. However, according to BitInfoCharts.com, the top seven Bitcoin companies are Bitcoin, Litecoin, Auroracoin, Peercoin, Dogecoin, Namecoin and Quarkcoin. The value of bitcoins varies in the same way that some currencies are more valuable than others, for example, the Euro is more valuable than the Dollar. In the case of Bitcoin, the original bitcoin has the highest value of all cryptocurrencies. To avoid confusion, the convention has been to use the capitalized word "Bitcoin" when referring to the technology and network, and the lowercase "bitcoin" when referring to the currency itself.
The computing power for Bitcoin is provided by 'miners'. Anyone can become a Bitcoin miner. Participants create bitcoins and help to authenticate and record payments into a public register in consideration of transaction fees and newly 'minted' bitcoins. Users can send and receive bitcoins by using ewallet software. The software is available on desktops, tablets and smartphones. Bitcoins can be exchanged for products and services, or for other currencies.

African Bitcoin Companies
On November 20th 2013 Afrikoin, an initiative to tackle the challenges of digital currency and payments in Africa, held a digital money event in Nairobi. One of the items on the agenda was the potential of Bitcoin to disrupt the $580 billion remittances market in Africa. This business is currently controlled by companies such as Western Union and MoneyGram which charge huge transaction fees (as high as 12%). Mobile money services have made inroads but Bitcoin has the potential to provide the lowest transaction charges. The decentralized peer-to-peer nature of cryptocurrency makes it ideal to avoid government regulation and bureaucracy and it could be just what is needed to bring about disruption that will benefit the masses.
Already, there are several Bitcoin companies operating out of Africa. ICE3X is South Africa’s main bitcoin exchange platform. They trade in bitcoin, litecoin and the Rand. Users must be South African residents and must hold a local bank account. In Kenya, there are several bitcoin companies that have set up shop. The most well-known is Kipochi, the first bitcoin wallet in Kenya with Mpesa integration.

Concerns
Even as Africa gets on the Bitcoin bandwagon, there are concerns that need to be addressed and mitigated. The biggest of these is the tendency for bitcoin value to fluctuate immensely. Experts, however, say that this shouldn't be too much of an issue for people who only want to transact and not necessarily hold onto bitcoin.

The fact that Bitcoin is unregulated also brings in a considerable amount of risk. The recent collapse of Mt. Gox, the largest Bitcoin exchange that went under with $470 million worth of bitcoin, is a case in point. To save the currency, backers may be forced to change their philosophy and embrace insurers, auditors and even the dreaded regulators. Human oversight may just be what is needed to make Bitcoin safe.
As with all things digital, there is always the risk of criminal activity. There are news reports that hackers are creating applications that mine bitcoins illegally or steal bitcoins.

Conclusion
There is no question that the possibilities for Bitcoin in Africa are enormous but its feasibility depends on local uptake. Africa has been known to occasionally pull a rabbit out of the hat, it is after all the continent that bypassed landlines and went straight to mobile and, skipped computers to tablets and smartphones.


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