With the failing currencies and costly payments, will there be a drive for Africa, towards fully embracing cryptocurrency?
There appears to be a potential for cryptocurrency in this part of the world, as it may thrive, owing to the economic landscape and demographic trends on the continent.
Looking at high inflation rates, volatile currencies and lack of banking infrastructure, coupled with an emerging, young and mobile population may just be a big break, for the rapid adoption of cryptocurrency.
According to reports, thousands of Africans signed up for cryptocurrency, a development driven by the economic anxiety, brought by the Coronavirus pandemic.
As of August 2020, Luno, a global cryptocurrency exchange platform, reported that a 79% increase got observed in the number of new customers investing in Bitcoin, from March 2020.
On cryptocurrency replacing FIAT currency
According to Owen, cryptocurrencies got created to provide a viable alternative to many of the shortcomings of the current financial system.
“The idea is not necessarily, to replace fiat currencies, but to provide a framework for upgrading financial systems, across the world”, Owen noted.
Cryptocurrencies are relatively new and at this stage of the process, they cannot replace fiat currencies.
Owen, however, stated that, as the shortcomings of the current financial system becomes more apparent, the need for an alternative, will become more prominent and cryptocurrencies are well-positioned, to take advantage of that.
“Unlike fiat currencies, cryptocurrencies, are well-equipped to take advantage of the benefits of the internet and as the world grows more interconnected, the digital attributes of cryptocurrencies, will make them more attractive to investors and more suitable, for practical use cases”, Owen added.
COVID-19 accelerating the embracing of cryptocurrency
With the uncertainty, caused by the pandemic, an entirely new audience is looking at crypto, for the first time.
They are beginning to think beyond the tried and tested way of managing money and exploring new ways to get the most, out of their money.
“At Luno, we recorded our highest number of active users, globally, in March and our signups in Nigeria have doubled, during this period.
National lockdowns have provided people, with more time to think about how they can make the most, out of their money and actually learn about crypto.
Equally, crypto has performed well in the markets, unlike traditional assets and people do not want to miss out”, Owen stressed.
Despite the growing interest, Owen Odia encourages all new users, to take their time, whilst learning about crypto.
“It is critical that people only invest in what they understand and don’t place all their money in a single investment”, Owen advised.
Cryptocurrency and cyberthreats
Is cryptocurrency really safe, from compromise, judging from increased cyber threats, globally, during the pandemic?
On this, Owen explained that, cryptocurrencies are underpinned by blockchain, which makes them, practically, impossible to hack.
A blockchain records and indexes transactions, creating a searchable database that only people, with the right permissions, can access.
Unlike a traditional ledger, however, blockchain gets decentralised, which means the information is not stored, in a central server.
Information gets stored, across a vast network of computers that is constantly checking and verifying that the records are accurate.
This makes hacking, practically impossible because, hackers would need to breach at least 51% of the network, to compromise the information.
While nothing that it is impossible, in theory, a hack of a blockchain network is, very unlikely to happen.
“At Luno, we also keep the majority of funds in “cold storage”, which are multi-signature wallets, with private keys, stored in different bank vaults around the world.
We are, also, one of the few crypto exchanges, with bank-grade security”, noted Owen.
According to Owen Odia, customers also need to learn to spot scams and phishing attacks, such as fake versions of websites and emails, trying to get you to log in your details.
These are not exclusive to cryptocurrencies, but owning crypto, makes you a more attractive target for them.
State of cryptocurrency post-COVID-19
“At Luno, we have always maintained that emerging markets hold the largest potential for cryptocurrencies and this hasn’t changed with the pandemic”, Owen emphasised.
She believes that, Africa is one of, if not the most promising regions, for the adoption of cryptocurrencies, due to its unique combination of economic and demographic trends.
Cryptocurrencies present an ideal antidote, to many of Africa’s challenges, around high inflation rates, volatile currencies and a lack of banking infrastructure.
“However, for meaningful adoption to occur, Africa needs robust exchange infrastructure, to facilitate the purchasing of crypto assets.
There is, also, still some work to get done, to give citizens a reason to hold and use cryptocurrencies, for storing value, payments and remittances.
Once these and other challenges are addressed, we will begin to see large scale adoption”, Owen Odia maintained.
Luno, recently expanded to Australia and plans expanding to both Kenya and Ghana, in the near future.
“We are, also, exploring some other markets across the world. Once we, officially, set up operations,, our mission will remain the same – to upgrade the financial system of every country that, we’re based in”, Owen concluded.
Featured Image: Owen Odia, Country Manager, Luno
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