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In November 2019, Twitter CEO Jack Dorsey made headlines around the world when he said Africa will define the future of Bitcoin. With its various use cases and suitability for the continent’s demographic and economic trends, there has been a growing buzz about its potential to improve Africa’s financial system. Due to its decentralized nature, Bitcoin can address many of Africa’s inefficiencies when it comes to payments, cross-border transactions and financial inclusion. However, it is not the only currency that could have a transformative impact on Africa.
At the moment they are finished 5,000 Alternative cryptocurrencies, known as altcoins, and while not all have sustainable use cases, there are some that Africans should be aware of.
Litecoin
Otherwise known as “bitcoin’s silver to gold” for their similar functions, litecoin was launched in 2011 with the intention of being a global digital payments system. However, despite comparing to bitcoin, litecoin is a cheaper and faster alternative, which can process payments four times faster than BTC, meaning it is often seen as a more viable option for transactions and purchases. newspapers.
According to a 2019 study, more than half of Nigerians and South Africans said it took more than a day to receive the funds when it was transferred to them. This statistic is cause for concern, especially when you consider that it is related to Africa’s two largest economies and the most dynamic shopping malls. The financial systems of these two countries, as well as the rest of the world, were overdue for an update and litecoin could provide the fastest and cheapest option they deserve.
XRP (ripple)
Despite its common association with the US company Ripple, XRP is an independent digital currency, which is neither owned nor controlled by any entity or person. It is an open source cryptocurrency and can be used by anyone, including Ripple. XRP’s main strength lies in its ability to enable cheaper and faster cross-border transactions than other payment networks. Operating on its own blockchain ledger, XRP transactions can take 3 to 5 seconds to process with the cryptocurrency acting as a bridge between different currencies.
One area where XRP could benefit many Africans is remittances. Second the 2020 report on the state of cryptocurrencies in Africa, in 2019 more than 48 billion dollars were sent in remittance payments in sub-Saharan Africa alone. However, despite being an important source of income for many families, traditional money transfer services charge very high fees, averaging 9% per $ 200 in remittances sent to Africa. With intra-African payments also struggling with high costs and slow speeds, XRP’s near-instant processing time and low transaction rates could provide a much-needed solution to the weaknesses of Africa’s current remittance system.
Bitcoin Cash
In simple terms, Bitcoin Cash (BCH) is a cryptocurrency that branches off from Bitcoin (BTC). It is not the same currency and operates through its own blockchain but they share many of the same properties. The main difference between the two coins is that Bitcoin Cash stems from the desire to improve Bitcoin as a medium of exchange, rather than as a medium of investment. With this in mind, Bitcoin Cash was created to facilitate day-to-day transactions so that they are cheaper and faster, and aims to become global digital cash to compete with payment giants like PayPal and Visa.
For Africa, these qualities of speed and cost will be critical in light of the upcoming AfCFTA. Cross-border payments with traditional banks can be slow and costly. In many cases, it can be much easier to take physical cash on a plane and give it to the recipient than to make a bank transfer. Bitcoin Cash offers a safe, immediate and cost-effective option for cross-border financial transactions that will make it easier for businesses to take advantage of the new business landscape.
Ethereum
Ethereum is a peer-to-peer public network with its own cryptocurrency called Ether. While Bitcoin aims to become a globally adopted currency that could replace conventional money, Ethereum is a global computer on which smart (digital contracts that are automatically executed when their terms are met) and decentralized apps can run.
These qualities could be particularly useful for land registry and property registration in Africa. The current lack of a reliable national land and real estate registry in many African countries creates cases of rampant land fraud, which is a serious obstacle to the continent’s development. According to UNECA, in most African states, more than 90% of rural areas are not listed, however, with its decentralized and encrypted blockchain, ethereum could act as a database that offers much needed trust and transparency to a critically underserved industry. .
So what does the future hold for us?
Humans are creatures of habit and for natural evolution to happen, there must be a strong enough incentive. This is especially true with technology, and unless cryptocurrencies have some tangible form of utility, people are unlikely to make any effort to adopt them. But in the context of the altcoins mentioned, their use cases related to speed, transparency and cost have many benefits for Africa.
Cryptocurrencies have the potential to turn the financial system on the African continent into a better one, but for that to happen, mass adoption is first required. For this to be achieved, greater awareness of the benefits is needed, as well as a solid investment in the infrastructure required across the continent. Only then will we see the full potential of cryptocurrencies in one of the most promising regions for their growth.
This editorial was written by Marius Reitz, the general manager for Africa at Luno. Luno makes it safe and easy to buy, store and learn about cryptocurrencies like Bitcoin and Ethereum.
