One needs to look back at why, and when, Bitcoin and blockchain came into being. It was 2008, post the latest global financial crisis, and there was a feeling that a better system would be needed. One where banks are not fully in control. Satoshi Nakamoto wrote an eight page white paper that introduced the world to blockchain and digital cash, but he also spawned a massive libertarian movement.
If Bitcoin and blockchain were catalysed by a financial crisis, and seen as a solution, it should follow that where there is ongoing financial crisis, the digital cash system, with its underlying technology, could be extremely beneficial. It is to this end that many believe that the true worth of this revolutionary technology will be felt in places across the African continent, not necessarily in the modern first world.
There are plenty of problems that need solving in Africa. These problems potentially can also be solved with a few key principles that are inherent to blockchain, such as transparency, and decentralization. From elections, to international remittance, as well as energy services and alternatives to banking; Africa has many broken systems that could be fixed by a new technology.
It is not even about using blockchain to do a patch-job on the continent, there is a real chance for many African countries to fully embrace blockchain technology even more so than their first world counterparts to become world leaders in this new space. Africa has, through colonisation, been dictated to in terms of its infrastructure, and this has mostly been a failure. But there now exists an opportunity for the continent to build its own technological infrastructure that could leapfrog it forward.
However, this ideal is more philosophical than tangible at present. There are a number of limitation to blockchain implementation that the entire globe is feeling, but Africa also brings in its own application issues. So, while the potential abounds, there needs to be a real effort to implement it successfully to make it work.
An African history
Africa was until the 1950s and 60s a predominantly colonised space. In her decolonisation, countries were left to rebuild off a foundation that was mostly used to exploit the land and the people. From city plans to banking infrastructure, Africa was modeled after European structures rather than ones that suited the people and the landscape.
As such, banking for example, has been problematic for a big portion of the African population as these financial structures are limited to cities whereas the majority of the population is rural. However, to survive in the globalised world, these banks are needed, especially for people who work outside of their borders and have to send money to family.
More so, a lot of the corruption and mismanagement in leadership and government in Africa comes down to a system that is easily corruptible and monopolised. African dictators are common occurrence as there is much room for centralised control and dictatorship, as well as ways and means of distorting democracy.
As such, the African continent has been put on the back foot, trying to sustain a system built to exploit its people, and without her own particular needs in mind.
On a philosophical level, blockchain technology has at its core principles of decentralisation, as well as transparency, and anonymity. It is the two former mentioned principles that really have a lot of application in Africa.
Firstly, looking away from the financial side of things, blockchain technology is aimed at taking away intermediaries – and in Africa – there are a number of spaces where intermediaries are corrupt, and inefficient. So, with blockchain, the processes that they can replace can also be made more efficient, and less prone to corruption.
It is things like elections that often come up in this instance. Still done with paper, pen and an election box, the system is not only inefficient, it is also highly susceptible to corruption.
But there are a number of other instances where blockchain technology can improve matters – such as energy and the power infrastructure across the continent.
Andy Li, CEO and Founder of Eloncity, a company that is looking to both greener electricity in Africa, but also decentralised electricity which is controlled by communities, explains how this solution works better than the current set up on the continent
“I am perhaps a bit biased, but I would say energy would be a good start for trying out blockchain in Africa. The infrastructure is missing and there is not much modernised productivity. Many cities in certain countries in Africa have limited energy, preventing them to innovate and grow. Therefore, energy as a shared economy seems to be a good start.”
Li touches on this idea of community – a strong African value which is also prevalent in the blockchain model. Blockchain infrastructure, with its decentralised nature, relies heavily on the community to effect its advancement and how it progresses, and in this case, energy and electricity which is community run rather than by inefficient centralised governmental agencies would be beneficial to the population.
Another view point on Africa’s best use case for blockchain comes from Lorien Gamaroff, CEO of Bankymoon, a blockchain and cryptocurrency consultancy firm in South Africa, as well as Centbee, a cryptocurrency payments and remittance company. Unsurprisingly, he believes the financial benefits of cross-border payments and remittance in cryptocurrency are prime for Africa.
“The best use for blockchain in Africa is as a currency for international remittance,” Gamaroff argues. “There is a lot of friction when it comes to cross-border remittances and cryptocurrencies allow for cheap and efficient transfer mechanisms. There is still the issue of regulatory uncertainty and access and so it will depend on companies developing products and ensuring regulators that local KYC and AML obligations are fulfilled.”
Again, Gamaroff also alludes to the issues that are being faced in implementing these blockchain solutions, and a big one will always be regulators regardless of where in the world you are.
The problem of implementation
Both Li and Gamaroff are trying to implement blockchain solutions where they believe they are desperately needed in Africa, but they both attest to a number of difficulties in doing so; some of an African context, and some of a more general blockchain context.
Li touches on third-world issues that Africa has when it comes to blockchain application, from something as simple as internet access, which is now mostly taken for granted in the first world.
“I believe the most challenging development issue would be the lack of the Internet infrastructure,” Li said. “Most of the connection goes through satellites and the throughput is very limited. This means nodes might have trouble stay synced with the blockchain, and that it would be probably more expensive to mine or run a node independently, rather than in developed countries.”
“Another challenge would be the development itself. Programming a blockchain requires knowledge in cryptography and databases, and there is a huge demand for blockchain developers worldwide. Why should they go to Africa? The ecosystem must be worth their while, and that creates an issue for the future.”
For Gamaroff, he sees more traditional blockchain implementation issues within an African context.
“Blockchain technology exists largely in a regulatory grey zone. Companies and businesses are reluctant to invest time and resources into research and development because they feel that regulators might retroactively punish them. What is needed is assurance and frameworks provided by regulators before sufficient effort can be invested.”
“Additionally, most blockchains are not suited for the use cases for which they are being applied. This is largely due to the issue of scale. Scaling blockchain technology to many users has been difficult. This must be addressed before blockchains can gain wide-scale usefulness.”
Where does Africa stand today?
It is clear the potential is there, but with that comes a host of issues in implementation, so where does Africa stand in terms of its blockchain ecosystem currently? It is clearly – not yet – taking off and leading the continent to a technological revolution, but it is neither being left behind and abandoned.
“There are a number of companies across Africa that are researching blockchain technology. There are still no implementations that are in full scale production apart from cryptocurrency related initiatives,” Gamaroff explains, going on to point out a potential pitfall in the future. “Many companies that are offering services that leverage blockchain technology are operating outside of existing securities, currency and commodities laws. It is only a matter of time before regulators apply pressure and those business models prove to be unsustainable. If any blockchains are to survive it will be first and foremost due to the application and adoption of a cryptocurrency. Once the currency reaches broad adoption other applications be possible.”
To this end, Li believes that it is important to engage and operate with governments and regulators to be a blockchain solution that can survive the African environment.
“While I’ve heard IBM is conducting research about blockchain in Africa and that Binance has launched a cryptocurrency exchange in Uganda, we are trying to get pilot programs going with the help of governments,” Li said.
“We are currently in talks with governments and energy companies in African countries to begin pilots in local communities. We intend, just like in Mexico and California, to build an infrastructure for them to generate their own energy using solar panels or windmills, and sell or to share it across our microgrid, using the blockchain to utilize transactions and have supply meet demand.”
Clearly, the road is a long one for the continent of Africa if it is too embrace blockchain technology. It is all too easy to point to problems and match them with blockchain solutions for the technology is so far reaching, but it is another situation to try and get these solutions to be viable and adopted to any useful scale.