EDINBURGH — Crypto currency sceptic Jamie Dimon, boss of global financial services firm JP Morgan, controversially stated that he would fire any trader caught dabbling in Bitcoin a few months back. Later it emerged that his own company was exploring facilitating Bitcoin trades. With all the hype around Bitcoin and trading picking up even among people who have little interest or knowledge in financial markets, it’s not surprising Dimon and others are concerned that there is a bubble of epic proportions that could easily burst. But what if Dimon and others of his ilk are wrong? As Rebecca Mqamelo observes in this carefully considered piece: blockchain technology is providing a welcome boost to business activity across Africa, though South Africa appears to be behind the curve of this trend. – Jackie Cameron
By Rebecca Mqamelo*
SAN FRANCISCO – 2017 has been a year of massive disruption down south; from the cable ties and chaos of SONA2017, to the polite coup next door, to the upending of cherished hopes and the birth of new ones at Nasrec this month, South Africa is adept, by now, at processing change.
Outside of the political revolving door, however, the world has been swept by a very different kind of disruption: the rise of blockchain technology and cryptocurrencies.
By now, most of us are familiar with newsfeed popups telling us that if we’d bought $10 of Bitcoin five years ago, we’d be millionaires today. The more informed are wishing they’d paid attention when their nerdy cousin told them about the imaginary internet money back in 2011.
The imaginary has now manifested. Had we taken the plunge, we might well be closer to that state of abundant wealth the pop-ups punt. Cryptocurrencies are about far more than speculation, however. At the risk of boring the 0.01% of the population who well know their mining from their forking and their trees from their DAGs, here’s an overview of what blockchain is, why it’s changing the world, and what we should be doing about it.
Bitcoin is among the thousands of cryptocurrencies that uses blockchain technology – a digitalised, decentralised public ledger. Blockchain is a data structure that allows us to make transactions and store information without having to trust a middle man, or even the person with whom we’re doing business.
The framework is built on what is known as distributed ledger technology (DLT), where transactions are encrypted and recorded as ‘blocks’. Each block, containing a number of these transactions, gets added to the chain in chronological order and becomes an immutable database – meaning that the information cannot be deleted or changed in any way. Importantly, every node (user or computer connected to the network) has access to the data at all times. Blockchain essentially nullifies the need for centralised recordkeeping. It has the potential to change the way we buy and sell, interact with government, and verify the authenticity of everything from land ownership and personal identities to free-trade coffee.
The International Monetary Fund recently published a document suggesting that banks around the world should seriously consider investing in blockchain and digital currencies as a means of adapting to new consumer and technological demands.
In a world where more and more governments and public institutions have proven themselves utterly untrustworthy, blockchain answers a need. It’s no coincidence that cryptocurrencies are thriving in developing countries, where accountability, transparency, and a stable political climate remain wishful thinking.
When Zimbabwe’s military seized power in November 2017, the demand for Bitcoin surged amid the shortage of hard currency, driving the price to a record high of $16,500 (165% of the global price at the time). In Nigeria, Bitcoin trading spiked by nearly 1,500% this year, and Ghana is seeing a steady increase in its number of blockchain-based startups, such as Bitland, which uses blockchain to bring clarity to ownership rights in a country where 78% of land is unregistered. Kenya’s BitPesa supports African traders who need to pay international suppliers.
Closer to home, local startups such as the Cape Town-based Wala are positioning themselves as a financial services alternative to African immigrants who want to send remittances back home without the headache of exorbitant cross-border banking fees. (As a student abroad, I’ll take any option that saves me R500 in banking fees every time my parents wire me money.)
What do governments have to say?
Most governments have responded pretty much in keeping with their views on personal freedom. China has banned cryptocurrency exchanges, while Russia has been openly talking about the prospect of creating its own state-controlled cryptocurrency.
In April 2016, Japan recognised Bitcoin as a legal tender, and the currency is now accepted at over 260,000 stores around the country. Nigeria already has an agency set up to combat crypto scams, with its government strongly behind all initiatives to help leverage the opportunities presented by the technology. The governments of Ukraine, Estonia, Denmark, and countless others are adopting the technology in numerous projects, including land ownership, identification systems, and humanitarian aid.
In short, everyone seems to be doing their own thing. While some countries are steering clear of the so-called fake money used for shady purchases on the dark web, others see in it the potential to transform financial services and public institutions.
In South Africa, individuals and business are, as usual, way ahead of our government. Thousands are using cryptocurrencies like Bitcoin and Ethereum as a store of wealth against the fluctuating Rand, and companies like Takealot, Bidorbuy and even the Kaizer Chiefs online retail store now accept payments in Bitcoin. Major cryptocurrency exchanges are already targeting Africa as the next big market, hoping to provide cheap and efficient services to a largely under-served population. 2018 will see a massive surge in adoption across the continent.
The South African government, meanwhile, has mostly turned a blind eye to the opportunities the new technology offers. We’ve been among the slowest of relatively advanced economies to develop judicial and financial frameworks to support it. It was only in February 2017 that the Reserve Bank announced its intentions to develop a national virtual currency.
Bankymoon, a local blockchain-based solutions provider, has been selected as the first business to trial regulations. Few thinkers in government seem much concerned, however, with exploring the long-term implications of the technology and its applications beyond digital currency.
For developers and entrepreneurs, blockchain is on the revolutionary scale of the internet. It will change how we store data, exercise leadership, run elections and view trust. It will be central to every transaction that involves a transfer of value. Imagine a voting system powered by the blockchain – the term ‘free and fair elections’ might finally ring true.
SASSA could well do with an overhaul of its system – this is the largest national store of biometric data, and currently the victim of legitimised corporate fraud. Immutable records of Minister’s assets, companies’ environmental records, faster insurance claims processing, decentralised Wifi – all are possible when we create an ecosystem in which blockchain technology thrives.
In the next few years, we will see blockchain disrupt and transform almost every industry we know. It’s not just a technological rise, but an ideological shift – the implications of which we have yet to understand.
- Rebecca Mqamelo is an Mthatha-born South African who is fresh out of high school and awaits to begin her first year of university at Minerva in San Francisco. She is a national debating champion, international public speaker and winner of the precocious title “Matric of the Year 2016”. Currently she kills time by writing, jogging and blogging. Her idea of fun is learning Russian and German, and watching Kazakh films.
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