It had been assumed that, if Africa was to see the development of a local digital currencies scene, that this would be based primarily around payments.
Given the failure of traditional banking methods, the high cost of sending and receiving money via established services like Western Union and MoneyGram, and the proven willingness of Africans to utilise alternative financial platforms like M-Pesa, a number of companies decided to bet on a role for bitcoin in the payments space.
This seemed to make sense, with more than 30 million diaspora Africans sending home billions of dollars each year. But it hasn’t quite turned out that way. Kenyan startup BitPesa is well-funded and seen good traction, but companies like Nigeria’s Bitstake and Ghana’s Beam launched amid much fanfare but quietly died.
G-J van Rooyen, whose South African startup Custos Media Technologies uses bitcoin and blockchain technology to cut down on digital piracy, told Disrupt Africa the digital currencies space in Africa was moving away from the payments narrative.
In this regard, he said, it is not too dissimilar to the evolution of the internet.
“The early internet mimicked traditional publishing: early news sites looked and functioned a lot like daily newspapers. We used the new technology to create improved versions of the communications paradigms we were familiar with,” van Rooyen said.
“Over time, the internet became more interactive, connected and social. It would have been very difficult to conceive something like Snapscan or Pinterest in the 1990s-era internet. These innovations emerged after we started to figure out the new ways in which technology could be used, that had no pre-internet equivalents.”
He believes we will witness a similar evolution when it comes to blockchain technology, where “better payment” is the first-order “killer app” for the blockchain.
“Over time, new use cases will emerge that would have been difficult to conceive initially,” he said.
Van Rooyen is certain cryptocurrencies like bitcoin will find their role in Africa, as they are “programmable money” that makes various existing fintech applications more efficient.
“Many innovators work on such applications, which include remittances, microloans, fundraising, microjobs, and other ways of moving money around in faster and more flexible ways than were possible before,” he said.
However, cryptocurrencies also enable concepts that just weren’t possible in the past. One of these, used by Custos, is that it is now possible to embed digital cash directly into other files. The cash is replicated in all copies of the file, but only the first person to claim it gets to keep it.
Custos uses this novel aspect of cryptocurrencies to implement a “finders fee” for copies of pirated media. This would simply not have been possible without the unique properties of blockchain-based digital currencies.
Van Rooyen believes bitcoin offers two very distinct advantages in Africa.
“Firstly, it is very useful as a remittance currency. Africa has a large number of countries and territories, with a mobile workforce that often migrates between territories for jobs and business. I think we’ll see an increase in the use of bitcoin as a currency held for brief periods just to remit between countries,” he said.
“Secondly, bitcoin is emerging as as a separate asset class, and is increasingly referred to as “digital gold”. Like gold, Bitcoin is scarce, is valuable, and can be exchange for fiat currency in most countries. Unlike gold, bitcoin is very easy to purchase and transmit. Bitcoin and other cryptocurrencies are likely to become a common component of a balanced investment portfolio, especially as a hedge against currency volatility in emerging markets.”
There are still hindrances to the uptake of digital currencies in Africa, such as the fact obtaiining them is still a cumbersome process.
“It’s difficult to get your first bitcoin without having a bank account that you can use at an exchange,” said van Rooyen.
“A significant step in digital currency adoption will be the ability to earn such currencies directly. Custos pays our anonymous bounty hunters directly in bitcoin; companies like 21.co facilitate cryptocurrency payments for knowledge tasks. I’d love to see a new Money4Jam, or a pan-African TaskRabbit, that allows direct digital currency payments for microjobs.”