Cryptocurrency Adoption in Africa: Is It Too Early for the Average African?

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The world has gone crypto mad. Everyone is talking about digital currencies and the potential they hold as an alternative to existing centralized financial systems. New cryptocurrencies are being launched almost every day, with new IDOs emerging on a weekly basis. This is particularly evident in emerging markets like Africa, where people have struggled to come to terms with a 21st century digital world that has left many behind in the 20th century. Unfortunately, much of this crypto activity has been out of reach for most Africans — until now. This article takes you through the state of cryptocurrency adoption in Africa and what it might mean for the future of fintech in the continent.

What is cryptocurrency?

A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it unfailingly independent. Cryptocurrencies operate as a decentralized entity independent of any centralized authority such as a central bank or government. Since cryptocurrencies are virtual and do not have any physical presence in the world, it is hard to determine which governments can control cryptocurrencies. While some governments have attempted to regulate cryptocurrencies, others have declared them illegal. The lack of centralized control also means that there is no way to repossess any unlawfully gained money in the way that a central authority like a bank or government can.

Why do we need cryptocurrency in Africa?

Cryptocurrencies have been used to fund terrorism, drug trafficking, and other criminal activities as easily as they have been used to help the unbanked in Africa, access capital and connect with potential clients and partners. But while the negatives are getting more attention, the possible positives from cryptocurrency adoption in Africa are slowly beginning to be realized. Cryptocurrencies can help the unbanked in Africa by providing a decentralized system that does not require the adoption of a specific bank or financial institution in order for transactions to be processed. Cryptocurrencies could also help to create a new generation of fintech entrepreneurs in Africa by providing a low barrier of entry to those who have the expertise to help solve problems in the African financial sector.

How is cryptocurrency different from fiat currency?

Fiat currency refers to any paper currency that has no intrinsic value. Fiat money is not backed by any standard of value other than the authority of the government issuing it. Fiat vs. Cryptocurrency Africa Apart from the obvious differences in the method of transaction and the way it is stored digitally, cryptocurrency and fiat currency differ in terms of decentralization and regulation. With fiat money, regulation is centralized at the government level, whereas cryptocurrency is decentralized among the network of those who use it. In terms of the impact the adoption of cryptocurrencies could have on the African economy, it is important to note that the digital assets are not to be confused with the stocks and bonds of a company or the gold bullion that is being used as collateral at a bank.

Who's using Cryptocurrency in Africa?

Cryptocurrency is an emerging technology that is not particularly well understood. This has resulted in a lot of myths and misconceptions about the industry. A recent study conducted by Global Financial Access suggests that the adoption of cryptocurrencies is higher in Africa than in many other parts of the world. The study found that while only 8% of US citizens are using cryptocurrency, this figure rises to 15% in Japan and 25% in Kenya. The study also found that cryptocurrency is particularly popular among the young and well-educated. Young people up to the age of 36 account for two-thirds of cryptocurrency users and those who are highly educated account for 80% of users.

Blockchain Technology in Africa

A blockchain is a digital ledger of transactions that is decentralized and distributed across a network of computers. The blockchain technology was originally created to serve as the public ledger for all transactions made using Bitcoin and other cryptocurrencies. The blockchain is programmed to record any type of transaction involving cryptocurrency, including trading, sending and receiving coins, purchasing goods or services and mining for additional coins. On the African continent, blockchain technology is being used to facilitate and streamline the trade of goods between African and non-African countries. Some of the ways blockchain technology is being used to improve the African economy include facilitating cross-border payments, combating fraud and reducing the cost of paper-based administration and transactions.

Final Words: Is it too early for average Africans to adopt cryptocurrency?

Cryptocurrency is of great importance to the African continent, but only if it is being used responsibly. The average African should be aware of the potential of cryptocurrency and must ensure they are adequately informed before they make any decisions to adopt it as a form of payment or investment. The average African must understand that cryptocurrency is still new and that there will be challenges along the way. Adopting this technology early will help solve many of these challenges and help cryptocurrency become the alternative to existing centralized financial systems we all hope it will be.

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