Whether one agrees with its implications or not, Bitcoin is considered to be one of the most critical pieces of open-source software in the past decade. This is due to its ability to solve trustless transactions, double spending, and introduced the concept of a decentralized ledger (the blockchain).
When most people think of Africa, corruption, poverty and overall instability probably come to mind. This is all true to a certain extent, and it’s colonial past and lack of development in its presence doesn’t make it a financially sound part of the world. Because of this, there is a failure to launch for so many tech-related businesses in the continent due to what would otherwise be easy-to-fix problems.
For starters getting a bank account in Africa may only seem like a pipe dream for the average person. Unlike in developed countries, banks only clients from the upper echelons of society and this leaving the working class as one of the largest unbanked populations in the world. Using Paypal or other applications are quite limiting since they tend to favor the United States or other developed countries.
Africa May Need Bitcoin Out of Necessity
Just going by official statistics, over 70% of Sub-Saharan Africa doesn’t have a bank account, making them financially disconnected from the international market place. This makes cash king in this part of the world, although it can be quite hard for aspiring internet entrepreneurs.
While it sounds like a backward region of the world, most of these unbanked people have access to smartphones and the internet. Since there is no barrier to entry when creating a Bitcoin wallet, this makes it much easier to hold digital funds than a traditional bank account. There are places in Africa with plentiful Bitcoin ATM’s available, making the cash to digital conversion easier.
Now let’s imagine if online commerce grows to the scale that it is in the developed world. Since bank accounts and debit cards are sparse, Bitcoin is one of the only viable means to make domestic or cross-border transactions. It even has much lower fees and skirts bureaucracy.
Inflation is a considerable factor in every country, but it is out of control in countries with political instability or weak economies. This is why people would rather hold their savings in USD, Euros, gold or Bitcoin (in recent years).
Zimbabwe is the most stereotypical example of hyperinflation and it continues to this day. Since the government has driven currency exchange and foreign transactions underground, Bitcoin is traded here at double market value as the rest of the world. This is likely due to Bitcoin being the only viable way for people to bring in or take out wealth without the interference of corrupt government officials.
In a less extreme case, even the South African Rand has degraded over time and the country no longer holds it’s First World status as it once has. Whether or not you could blame it on a major regime change, the country is rife with corruption and the government is spreading the currency thinner every year. This has affected the cost of living and wages of the working class.
Taking a look at Nigeria, the country is one of the fastest-growing in the world in terms of population and economy. It should also be no surprise where online commerce is growing the most. This country alone makes up a large chunk of transactions on marketplaces like Localbitcoins and Paxful, showing that there may already be mass Bitcoin adoption in Western Africa.
A Mobile Solution
As briefly touched upon, mobile phone usage is the largest growing industry in Africa, yet banking is stagnant. This is why there is a surge in demand for mobile-only payment solutions that are not integrated within traditional financial institutions. Since Bitcoin wallets available in every app store, it always remains a viable and available option.
While there are already mobile platforms stepping up to act as payment solutions for small businesses, Bitcoin always remains as an alternative for cross-border transactions. Since corruption is deep-rooted in most African nations, it may be the safer route to send funds for international B2B deals.
In Australia and other developed nations, Bitcoin may seem like an afterthought considering our strong currencies. On the other hand, the poorest parts of the world will see a great advantage to using Bitcoin as it empowers small internet-based businesses that would otherwise struggle in their local markets. If anything, the tech hurdles that Bitcoin has solved in fintech will quite possibly spawn more online payment solutions that will take down barriers for small businesses.