Bitcoin is quickly infiltrating the African market. But what is Bitcoin? And, can it be trusted?
What is Bitcoin?
Bitcoin is a form of decentralized digital currency that exists within the online, electronic community. Thus, one can use it to purchase things electronically. The digital coin is also used to store value, and is the most stable virtual currency on the market currently. Bitcoin is one of the world’s greatest digital stores of value. The coin is stored in an online wallet. Bitcoins are mined using computing power in a distributed network, meaning that transactions are collected and formulated in what is referred to as a Bitcoin block, and confirmed in a general ledger. Late October, Bitcoin’s market cap surpassed $100 billion, shrugging off a clamp-down on cryptocurrency trading in China earlier in the year. According to Roger Ver, CEO of Bitcoin.com, “Bitcoin is one of the most important inventions in all of human history. For the first time ever, anyone can send or receive any amount of money with anyone else, anywhere on the planet, conveniently and without restriction. It’s the dawn of a better, more free world.”
The cryptocurrency is poised to become mainstream, infiltrating the finance and trade sector. CME Group, one of the largest exchange owners in the world, made the announcement that they would introduce trading in Bitcoin futures by the end of 2017, which instantaneously led to a spike of 550% for the currency. Major finance houses are split on this announcement, with some supporting and others heavily criticizing the movement. “This is big news. As a proxy, gold derivatives markets are much larger than gold markets. The same could happen here,” said Kyle Samani, managing partner of cryptocurrency hedge fund Multicoin Capital. “Overall, this is a big deal for crypto.”
“When confidence in national currencies wavers because of monetary policy or political uncertainty, bitcoin often behaves as a safe haven because the price is totally based on market discovery,” says Nolan Bauerle, director of research at news site CoinDesk. Spot pricing for bitcoin climbed as much as 7.1 percent to a high of $7,045.46 on 2 November 2017 in London before pulling back slightly to $6,968.25. The cryptocurrency is up as much as 640% this year and now has a market cap of $116 billion. Some argue that we are just scratching the surface of Bitcoin’s potential.
And it does not seem to be leaving any time soon. “It’s a cleaner, more efficient, less expensive market,” Byrne said Tuesday at tZero’s offices in New York. “It will start with ICOs, but all the forces of economics will drive blue-chip issuers to this, and eventually we’ll see the first McDonalds or GM tokens. This isn’t going to stay a novelty.”
Bitcoin in Africa:
Bitcoin is gaining traction throughout the African continent. The 2017 MyBroadband Cryptocurrency Survey revealed that Bitcoin is currently the most popular cryptocurrency in South Africa. Recently, the cryptocurrency had reached an all-time high worth of R100, 036 per coin in South Africa. In fact, Pick n Pay recently trialed a bitcoin payment option for customers, with deputy CEO Richard Van Rensburg saying that “Our pilot resulted in a transaction that was safe – there is no cash risk and no card fraud risk”. It has also gained mass popularity in Zimbabwe, and Tanzania. In fact, according to Yeukai Kusangaya, who coordinates trades at the Golix bitcoin exchange in Zimbabwe, “there is currently more demand than supply of bitcoins.” In Zimbabawe, Bitcoin has become a great alternative to sending money internationally, or paying for international transactions without the use of formal banks. Kwesi Otoo Mensah; Cryptocurrency Consultant and Digital Coach believes that the cryptocurrency has the potential to greatly improve Africa’s future by meeting its current challenges.
There are quite a few benefits to using Bitcoin. One is that it is fast and cheap. By bypassing banking institutions, transactions avoid the waiting period banks often hold. You also avoid transaction charges. In addition, because Bitcoin transactions cannot be reversed without authorisation, you are safer from chargeback reversal fraud often experienced in credit-card transactions.
Another benefit is that your payment information cannot be stolen. Because Bitcoin only requires a public and private key, you do not have to input personal information such as a credit card number and CSV number. As such, doing online business is way more secure. Furthermore, because the crypocurrency is decentralized, you own it. Thus, your money cannot be taken away from you by a bank. For those who are distrustful of banking institutions, this is a great plus.
As with anything, there are quite a few risks attached. JP Morgan Chase & Co’s Jamie Dimon, argues that the cryptocurrency is a fraud, and would fire any employees trading in it. Despite its benefits, what complicates things is that Bitcoin is unregulated, and as such comes with many risks. One massive risk is that there are no safety regulations attached to it; if you lose your private key, you lose all the funds attached to it. There is no one that can be held accountable for this, or who can assist in reclaiming lost funds. According to research, a third of bitcoin exchanges have been hacked since its 2009 inception.
Similar to any other currency or product, Bitcoin’s price is subject to the laws of supply and demand. As such, it is common for its worth to fluctuate. The cryptocurrency is incredibly volatile. Furthermore, if it is made illegal in major economies, such as China or the US, its value would take a huge hit, and struggle to recover.
Bitcoin currency can easily be abused. Technical weaknesses, human dishonesty, and human mismanagement can all lead to the cryptocurrency not performing well. The crypocurrency has also been linked to the MMM Ponzi scam that took over many African countries in 2016.
The cryptocurrency has many benefits, but also many risks. It is incredibly important to do your research and make an informed choice when considering investing in Bitcoin.
What do you think? Is Bitcoin the future? Let us know in the comments below!