Money, as the old saying goes- makes the world go around. The concept of presenting something of value in exchange for goods and services dates back thousands of years, but since physical notes and coins began circulating in most societies, currencies haven’t evolved a great deal.
However, for the last five years, currencies have started to change- the biggest change emanating from the digital world with the introduction of the first cryptocurrency – Bitcoin.
In 2009 the strictly-online currency paved the way for others to follow, and today there are more than 60 cryptocurrencies available for trade online.
What are cryptocurrencies?
Cryptocurrencies are a digital medium of exchange –i.e. a currency which operates digitally using cryptography rather than using notes and coins. Cryptography is a technique used for safe and secure monetary transfers all in the presence of a third party.
What is Bitcoin?
Bitcoin is a cryptocurrency which enables you to undertake anonymous currency transactions. This means that no one will ever come to know about who made the payment and to whom the payment was made. Other details related to the payment will also be concealed between the sending and receiving party. Bitcoins work on a Peer-to-Peer system, which means that the currency will not be controlled by any central authority nor will any authority come to know that a transaction has been made.
Of the 60 currencies available, the top ten are Bitcoin, Litecoin, Peercoin, Namecoin, Dogecoin, Quarkcoin, Novacoin, Feathercoin, Terracoin and Freicoin. But not all currencies are created equal as some have a value of a few US cents, while currencies such as Bitcoin recently crossed the $1000 mark for one “coin”.
According to BitInfoChart, Bitcoin is currently trading at an average of $829, there are 12,285,059 Bitcoins available, has a market capitalisation of $10,184,314,199 and 68,599 transactions took place in the last 24 hours. In comparison, Freicoin is worth about 4c.
Bitcoin in Africa
In South Africa, a number of Bitcoin exchanges exist where users can buy and sell Bitcoins using Rand – at the time of writing, one Bitcoin was worth R9414.
Pelle Braendgaard founded Kipochi in Kenya last year, Africa’s first Bitcoin wallet with M-Pesa integration and believes that it could transform the way Africans do business. With Kipochi, Kenyans will be able to send and receive Bitcoins, and then convert the funds into an M-Pesa currency.
Braendgaard says that by using the service, users can dramatically lower their banking costs and since the service is purely online, it has the potential to reach many unbanked users. According to the company- “now with Kipochi, the remittances into Kenya has a faster and cheaper way to reach even the most remote areas in Kenya, villages with no banks or Western Union services – in an instant.”
Braendgaard added that Bitcoin can also reduce the cost of cross-border transactions from 12% down to 1%. “Bitcoin shouldn’t be viewed so much as a currency, but simply a transaction platform, that allows you to send and receive value from anyone anywhere in the world,” he explained.
Also taking on the high transactional cost of traditional banking, is BitPesa, a Kenyan-based money transfer service specialising in Bitcoins. “Gone are the hidden fees, unfair exchange rates and unreliable delivery. We use the next generation of payment system infrastructure to offer guaranteed same-day delivery at a third of the cost of bank transfers or other money transfer services,” the company states on their website.
BitPesa is currently in talks with multiple banks and network operators in order to get the service off the ground. “To get cash in Kenya, people either work for it or they get it sent to them. Remittance really supports a large proportion of the population and it helps people through difficult times. Remittance is a huge market and I have always been aware of that here,” Chief Executive Officer Elizabeth Rossiello said in an interview.
While there are real market applications to using Bitcoin, the currency is extremely volatile, making it a somewhat dangerous commodity. The value of Bitcoin can change drastically overnight without warning, which could leave many users with far less money than they anticipated.
World Wide Worx Managing Director Arthur Goldstuck is of the opinion that Bitcoin shouldn’t be taken seriously. He says, “I think Bitcoin is a wonderful adventure. It’s great if you are open to speculation and if you are willing to take a gamble. But to take it seriously as a currency, you are really entering a casino and treating the chips on the table as a serious currency,” Goldstuck said in an interview with South African journalist Bruce Whitfield.
And as with most online activities, there is definitely a shady side to Bitcoin. The currency has been linked to criminal activity and black market purchases on the now-shut Silk Road website – and since Bitcoin transaction are completely anonymous, it is the perfect disguise.
While there exists a definite potential for the currency in Africa, one of the major factors that could inhibit its growth is the currency’s volatility. It is true that Bitcoin could drastically reduce inter-bank and cross-border transaction fees, but since the value could change at any time, one Bitcoin could nosedive by millions of Kenyan shillings without warning – leaving many rural users out of pocket.
While countries such as Australia, Germany and Poland have accepted Bitcoin as a form of payment, Iceland, Thailand, and Malaysia have made Bitcoin illegal. The use of Bitcoin is also a contentious issue in Russia, India and China. From an African perspective, there is currently no official recognition or regulation of Bitcoin on the continent
The people behind Bitcoin are facing an uphill battle for worldwide recognition, and as it stands now, it is unlikely to become a widely traded currency – especially in Africa.
Alakanani Itireleng, a Bitcoin user from Botswana, believes that while the allure of the currency drove her to start mining (earning) Bitcoins, it’s harder than she thought – and worries that some websites that offer free Bitcoins might be nefarious.
“It has been a long bumpy road. When I started with Bitcoin, I joined one site where I had to refer members who could earn 0.01 bitcoins for every task, and the payout amount was 1 bitcoin. I worked hard and made 1.34 bitcoins. But when I tried cash out to my wallet, I couldn’t because I had to take out some kind of survey, which the site says is not available in my country,” she told Motherboard.com
“I believe some of these sites, are just taking us for a ride on people’s enthusiasm and the hype because people are in love with it.”
However, despite the associated dangers, she vows to press on. “It is difficult for people to buy into the idea of Bitcoin, truth be told, but I am a dreamer. I don’t want to give up.”
Charlie Fripp – Consumer Tech editor