Last year, search entries in google for the words ‘Bitcoin’ and ‘blockchain’ were in the hundreds of millions with South Africa taking the lead. It shows that there is growing interest in the B buzzwords in Africa.
Beyond the hype, are there any benefits of the innovative technology for Africa’s economy? Join us as we find answers to this important question.
What is Blockchain Technology?
It’s common to find people who erroneously assume blockchain and Bitcoin are synonymous. A closer look at both will reveal they are different. Bitcoin is essentially virtual money which you can send from one person to another without the need of a third party. That’s why it’s called a trustless system. Blockchain is the technology on which Bitcoin runs, essentially the fuel that powers Bitcoin.
As a definition for blockchain, I’ll briefly recap a simplistic one given by a Blockchain Personality and Financial Anthropologist, Samson Williams. Blockchain is likened to a group WhatsApp chat where you can see new messages sent by each member of the group. These new messages are transactions. Every member can see the transactions every other member carries out. The immutability of the blockchain is what differentiates it from a WhatsApp group chat.
Immutability here means recorded transactions which cannot be changed or altered. To add new data to the blockchain, such data must first be verified by all or a large percentage of participants. This is where the consensus protocol comes in. We’ll talk about the different consensus protocols in a latter article.
Blockchain’s popularity grows daily and majority of people who are following the growth of this system believe that blockchain holds the future of business transactions. This is true, especially for Africa. What Benefits does Blockchain Technology hold for Africa’s Economy?
Blockchain Technology Boosts Businesses
Currently in Africa, conducting international businesses involves long transaction processes which are sometimes also challenging. Even using channels such as Money Gram, Western Union, SWIFT and other possible mobile transactions do not solve this problem.
More than half of the use cases for blockchain today are in the financial sector. Perhaps, that’s the reason most people assume bitcoin and blockchain are synonymous.
With blockchain technology, the issue of delayed transactions and long processes that might cause more expenses can be solved and speedy financial transactions seen. Thousands of dollars can be channeled from one country to another in a matter of seconds or minutes, and at lower fees. Speedy and instantaneous transactions would encourage more investors to set up shop in the continent.
Blockchain technology Offers Security for International Business
Have you ever wondered why some investors prefer not to invest much in Africa? That’s because of the poor financial security framework in place. The condition is made worse when one considers the fact that most of these transactions are done online. Investors will be more willing to invest with the assurance of increased security that blockchain technology provides. The assurance that their funds are safe could mean more financing of business projects in Africa.
Blockchain technology preserves digital assets
Tokenization of assets on the blockchain is one of the most cherished features of this technology. Intellectual property owners can now do away with labels and sponsors as they’ll get their royalties direct from their audience. This would help save the continent from the increasing brain drain, as human capital leave in droves due to promises of a better future outside.
Real Estate owners can also tokenize their properties on the blockchain and easily transfer to whomsoever they desire. It reduces paperwork and saves time and expenses needed for manual transfer of ownership.
Tokenized digital assets will also eliminate counterparty risks in the capital markets on the continent. The fast transactions of blockchain means spot trading can now finally exist.
Blockchain technology is Trustworthy
It’s called a trustless system because one does not need an intermediary. Adopting blockchain in business transactions in Africa would increase trust for all participants while making transactions.
Come to think of it, none of us would buy goods from an online store that we do not trust. We would be skeptical about sending money before receiving the product. Questions running through our minds will include: will the seller send the product? How are we sure it is of the said quality? And many more will be doubts on our minds. But we will readily place an order on Ebay, Amazon, Alibaba and many other renowned stores. Why? The answer is simple – Trust!
Over the years of dealing with them and seeing their available records, we can easily trust these sites.
The same opportunity for trust in business without unnecessary attendant fears is what the blockchain technology presents African businesses.
Transactions can be made without a third-parties being involved, reducing the risk of unauthorized interference or other backdoor operations; which will drive sales and will be a boost to Africa’s economy.
Blockchain technology will Decentralize the economy
Vitalik Buterin defining blockchain said, they “…are politically decentralized; this means that they are controlled by no one person or organization and architecturally decentralized – no infrastructural central point of failure, but are logically centralized, since there is a commonly agreed state and the system behaves as a single entity in other words called ‘block’.”
How is decentralization of blockchain beneficial to Africa’s economy anyway? First of all, it would lower the entry bar for the unbanked and underbanked. Being able to be your own bank, in full control of your financial resources, via your wallet is a luxury many in Africa are eager to taste. Best part? You need no documentation or other compulsory identification which most of the underbanked and unbanked lack anyway. Looks like at last, the gap between the haves and have nots – which is so wide in Africa – would drastically reduce and even soon be obliterated.
With a decentralized economy, money flow of the government, companies and individuals can be transparently monitored by anyone. Cases of fraud, corruption and embezzlement which has nearly crippled various African economies would become sad stories of the past.
Blockchain Technology will Automate Shipping and Logistics
Africa is blessed with abundant resources, most of which are exported. Africa is also a huge consumer of foreign goods. Thus, the import and export business in Africa is an evergreen one. Implementing shipping and logistics solutions on the Blockchain would go a long way in automating most of the processes involved. The result is faster delivery time to move from the departure point to arrival and less costs by breaking up the lengthy bureaucratic red tape which always has black holes for swallowing up money.
Without a doubt, businesses under an environment that favours the ease of doing business will flourish. Flourishing businesses means a more robust African economy. This is the opportunity that blockchain technology presents to Africa’s economy.
Let’s utilize blockchain beyond crypto speculation. Let’s take necessary steps in the right direction by facilitating mainstream adopting of blockchain technology in a bid to benefit the African continent.
Opportunities are boundless. This is just the beginning.