Cryptocurrency is causing a disruption to the traditional banking system and many societies are experiencing a gradual transition towards a cashless society, positioning digital currencies as the future of banking and commerce. Cryptocurrency offers additional opportunities for the African economy due to its flexibility.
What Are Cryptocurrencies?
Cryptocurrencies are encrypted digital currencies which are decentralized and not controlled by a centralized government. Although certain governments such as Venezuela are creating their own cryptocurrency, it is still largely decentralized. It is also an open source transaction controlled by codes on peer to peer networks where each transaction is built on a block that must be verified by each node. This makes it difficult for one single entity to determine or affect the currency.
Cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and Dash are encrypted currencies that use cryptography to ensure that transactions are secure. Cryptocurrencies are built on a secure platform called the blockchain. So, each transaction carried out is secured through linear additions of information on blocks that are added to the chain, therefore, tracing transactions is made easy.
As the world moves towards adopting cryptocurrencies as a medium of payment, Africa is not to be left behind. Forward-thinking Africans have already taken it upon themselves to ensure that African also adopts digital currencies to its system as cryptocurrencies such as Nurucoin, and Ditcoin are native to Africa.
Cryptocurrencies are proving to be a solution to Africa’s economy as it offers financial inclusion, generates employment opportunities, which is seen in the growing cryptocurrency startup industry. Startups such as Kenyan owned BitPesa and Nigerian owned Bitkoin are providing local and Sub-Sahara exchange services in Africa.
Cryptocurrency can be an alternative to the African inflation situation. The continent has a history of inflation or hyper-inflation like Southern Sudan is experiencing currently. The country’s inflation rate was recorded at 11.2% in February. It’s no wonder there’s a high rate of cryptocurrency users in Nigeria as the country experienced an inflation rate of 15.37% in 2017, making cryptocurrencies a better option than the volatile local currency.
A Better Option for Cross-border Payments
The first cryptocurrency ATM was shipped to Zimbabwe from Swiss with bitcoin being an attractive option for the citizen as the country’s currency had collapsed. It also proved to be a great option as online payments were restricted by banks in most cases. Cryptocurrency also offered a great choice for remittances which the African economy relies on. Countries such as Kenya have diaspora remittances which reached $1.95bn in 2017 alone.
Cryptocurrency offers Africans faster intercontinental and cross-border trade payments than conventional currencies. Transactions with cryptocurrency are faster and will serve as a catalyst for the growth of the African economy. It also offers African traders a wider reach as they can accept cross-border payments without going through institutions such as PayPal which is restricted to Nigerian users.
The wide range adoption of cryptocurrencies even to the local markets, restaurants, bars and so on is what the African crypto space looks forward to. But till that happens, African cryptoprenuers are working to make cryptocurrency adoption in Africa easier.
Do you think cryptocurrency will liberate the African economy or should we just stick to the conventional system?
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