- August 23, 2017
- Posted by: Mona Abisourour
- Category: Africa, Blog Category, Financial Services, Technology & Telecommunication
Over the course of history, humans have been trading goods and services using different means. All these means have something in common – the agreement of their value, and thus their use in operations. One example of an ancient form of human exchange was witnessed in Micronesia where they used an exchange method called the ‘yap’ which were massive ray stones. These ray stones were so big that people were unable to move them, however they were still being used as a means of exchange just by knowing who was the owner of which part of the ray stone. The idea behind this is simply that ray stones or any other exchange mean does not have any intrinsic value apart from the fact that people came to an agreement of their value. Cryptocurrencies could be interpreted as the digital version of the ‘yap’ ray stones. Just like internet has changed the way we communicate in modern day, cryptocurrencies are about to change is a modern, digital means of exchange with an agreed upon value.
Cryptocurrencies are digital currencies that are not ruled or governed by any institution. They are designed to be used outside of the intermediary rule that is applied today by financial and governmental institutions. It introduces a very independent, yet very secure system. According to the Coinmarketcap, as of August 2017, there were 843 currencies, where Bitcoin, Ethereum, Ripple, Bitcoin Cash and Litecoin remain the best ones mainly based on their value in USD and their circulating supply. Bitcoin alone has on average daily transactions of 288,953 which is the equivalent of 150 million USD. In addition to that, it is important to mention that Bitcoins are released through a process of mining. In the cryptocurrencies system, accounts given to the users are similar to simple blank sheets of paper. In these sheets, every user has to write down any transaction they were part of. What is special about this system is that any transaction written by any user appears in every other users’ sheet. This essentially gives any user the access to transactions happening in the whole system. The only difference is that the users are connected through a computer code network rather than paper sheets. The rationale behind this system of sharing everyone’s transactions is having everybody else confirm their ownership of coins following the basic and historical exchange system rule. The list of all the transactions is called the blockchain system. This blockchain technology works like a database in which all the transactions are stored, and that automatically performs calculations right after any transaction to update the users’ account and show each users’ balance.
Cryptocurrencies are growing in popularity and increasingly been used in African nations. According to an article written by Rainer Michael Preiss, an Adjunct Researcher at NTU_SBF Center for African Studies, digital currencies, primarily bitcoin are increasingly taking roots in countries like South Africa, Ghana, Kenya, Botswana, Zimbabwe and Nigeria. Various factors make Africa a potential platform for a successful blockchain economy yet one of the main possible reasons for its growing popularity would be that Africa has a need for an alternative to its local fiat money mainly due to its lack of reliability and accessibility. Bitcoin and cryptocurrency systems in general suggest not only a better alternative to fill these existing gaps but also an opportunity for the population to control their wealth and enhance transparency, giving birth to a new era of stronger social justice in Africa. This innovative means of trade is about to update the way humans exchange and perform transactions. It suggests a practical and transparent way of doing so. These advantages are simplifying the process of trading and could potentially solve certain social and financial issues faced within societies.
Tareq Amhoud, Analyst at Infomineo.