What is Blockchain?
Blockchain is a decentralized, peer to peer, immutable storage network which is censor free and regulator free because of the absence of one single controlling entity. Every transaction that is written is voted upon by a majority of nodes and changing something which was written before in the chain is computationally very difficult.
An example would go this way “You’re reading your emails on your device, phone, tablet, laptop. Someone throws your phone into the water. This is sad and annoying, but your email is not lost because you can still access it on your laptop or tablet.” Blockchain is the same, it is a distributed data storage system, which has massive opportunities to reduce corruption and inefficiency.
What can it be used for?
While blockchain is far from perfect, it certainly has plenty of real-world applications.
1. Payment processing and money transfers: The first thing that comes to most people’s mind when they hear blockchain is ‘Bitcoin’. Arguably the most logical use for blockchain is as a means of transferring funds from one party to another. As noted, with banks removed from the equation, and validation of transactions ongoing 24 hours a day, seven days a week, most transactions processed over a blockchain can be settled within a matter of seconds.
2. Authenticated Digital voting: In a continent like Africa where voter fraud is rampant, blockchain technology is here to save the day. Blockchain offers the ability to vote digitally, but it's transparent enough that any regulators would be able to see if something were changed on the network. It combines the ease of digital voting with the unchanging nature of blockchain to make votes truly count.
3. Smart Contracts: Smart contracts can be built on top of a ledger and operate as decentralised applications. These programs can run functions which are becoming more sophisticated and may diminish the need for standard legal contracts.
4. Real estate: One of the primary goals of blockchain is to take paper out of the equation, since paper trails are often a source of confusion. If you're buying or selling land, a house, or a car, you'll need to transfer or receive a title. Instead of handling this on paper, blockchain can store titles on its network, allowing for a transparent view of this transfer, as well as presenting a crystal-clear picture of legal ownership.
5. Tracking prescription drugs: Blockchain technology could be used for transparently tracking prescription medicines. In a world where prescription returns do occur, and counterfeit medications are in surplus, blockchain technology offers drug makers or companies the power to track their products to ensure that consumers get the original product when they finally get the medicine at the pharmacy.
What is Cryptocurrency?
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. In simpler words, Cryptocurrency is a virtual currency or a digital currency. It has value like money, can be exchanged for money, can be lent or borrowed like money. But it does not have any physical presence. And most importantly, there is no issuer or backer like a central bank. And banks are not needed even for transactions using cryptocurrencies. Transactions are recorded on a digital public ledger called a Blockchain. Transactions and the ledger are encrypted using cryptography. That's why it is called cryptocurrency. It is also decentralized, which means that it is controlled by users and a computer algorithm and not a central government. An example is Bitcoin, other cryptocurrencies include Ether, Ripple and Litecoin.
What can you use it for?
1. Fast and Low-cost money transfers: Banks in Nigeria charge an average of N50 to make money transfer locally, making international transfers is another hassle that comes with exorbitant charges. One of the major benefits of cryptocurrencies is sending and receiving money at a low cost with fast speed. For example, a recent $99 million litecoin (LTC) transaction took just two and a half minutes to process and it cost the sender $0.40 in transaction fees. If this money transfer had gone through a normal bank in Africa, the fees would obviously have been way, way higher and the transfer would have taken days, if not weeks, assuming this was an international transaction.
2. Ability to Make private transactions: Contrary to popular opinion, Bitcoin isn't an anonymous cryptocurrency — rather, it is pseudonymous. Bitcoin makes use of a public key to secure transactions, the key isn't linked to any identifiable information, this is why it is perceived as private. But in theory, information about a person using bitcoins can be gleaned over an extended period of time.
Private digital currrencies such as Monero (XMR), Zcash (ZEC), and PIVX (PIVX) enable users to make anonymous financial transactions. With this digital currencies, individuals can make money transfers without having to explain to a bank why they are sending a certain amount of money, what the sources of the funds are and who they are sending it to, this processes involve unnecessary bureaucratic and can delay the transaction.
3. Send Non-cash remittances: Another awesome use of cryptocurrencies are non-cash remittances. Avery good example is the Nigerian blockchain startup named SureRemit, what SureRemit has done is create an app that allows its users to send non-cash remittances like mobile data top-ups or utility bill payments from anywhere in the world to selected African nations.
Diaspora Africans can now purchase SureRemit’s native RMT tokens, which are then used within the SureRemit app to make non-cash remittances for their relatives in Africa.
In December 2017, the company raised $7 million during its initial coin offering and they plan on using this money to improve the platform and expand into new markets.
4. Alternative store of wealth: Fun fact; no personal bitcoin wallet can ever be frozen by the authorities. Cryptocurency as an alternative store of wealth is one the most unique and powerful use of crypto.
Bank account and assets could be frozen, and the reality is that this occurs more often than people know — especially in places with suspicious rule of law. Sometimes all it can take is for someone to be accused of financial misconduct or make a powerful enemy. When that happens, people can find themselves with little to no access to cash, even if they’ve done nothing wrong.
This is where crypto comes into play. Cryptocurrencies, such as bitcoin, act as a censorship-resistant alternative store of wealth that only the individual with the private keys to the wallet has access to.
The relationship between Blockchain and Cryptocurrency
A lot of people would presume that the blockchain technology refers to cryptocurrency, and the first thing that comes to mind is Bitcoin. Well, that is the most famous type of cryptocurrency. The truth and reality of it is that the blockchain technology could be used for so many things as listed above.
Blockchains are signed, peer-to-peer, distributed ledger databases, and a cryptocurrency is a digital asset that can be an exchange medium. Cryptocurrencies are implemented by using blockchain technologies, the Blockchain technology is what allows transactions using the cryptocurrency to occur in a decentralized, distributed fashion. This decentralization is why using cryptocurrencies have so many advantages.
Challenges facing Blockchain and Cryptocurrency adoption in Africa
At the last Ingressive Ecosystem Hangout themed “The Economics of Blockchain”, it was discovered that private companies and government bodies are working towards a way to use blockchain and cryptocurrency to grow the economy and transform many things in the country. One of the speakers from Luno, who explained that there is a committee set by the Central Bank of Nigeria making policies for cryptocurrency. This is the problem of regulation, key aspects of blockchain like cryptocurrency, data encryption, identity management, taxation, attracts the attention of the government and government wastes time because the regulations have to pass through many body and arms.
Looking further is the need for validation, a lot of African Banks run when they hear the word crypto because they are scared of the the effects they feel it might have on the economy and the loss of control. Africa still have a long way to go before considering cryptocurrencies as legal tenders, and as such are not of major interest to the people yet.
One of the major problems is the cost, the amount needed in storing data in blockchain databases are really much and it is always a one off payment. Apart from the cost for storing data in the cloud, there are other costs to be incurred such as blockchain development, deployment and system integration, which will amount to a very huge amount of money that cannot be easily raised by the African government.
Another challenge to highlight is the access to internet, only 31.2% of has access to internet connection and the speed and strength of the connectivity is not reliable. Even though usage and access grows daily, poor internet connection and electricity is big hindrance to the growth of blockchain technology and cryptocurrencies.
Blockchain technology is set to be the key to a digital economy in Africa and the world at large. There are so many challenges this world changing technology can solve because it has the ability to improve financial services in all industries, eradicate the high costs of transactions, and enable faster, secure transactions. In addition, it can help in the security of data and records are stored safely in an immutable digital ledger. Do you think Blockchain and Cryptocurrency have a future in Africa?