By Antony Mutunga
“The blockchain is custom-made for decentralising trust and exchanging assets without central intermediaries. With the decentralisation of trust, we will be able to exchange anything we own and challenge existing trusted authorities and custodians that typically held the keys to accessing our assets or verifying their authenticity” – William Mougayar
IN this digital era, it is difficult to find someone who has not heard about cryptocurrencies and the technology behind them. They have been the talk world over as they grow more and more popular and disrupt all types of markets around the globe. Since the introduction of the blockchain technology and its products, the world has been shifting towards a new norm especially in terms of how we handle our day-to-day tasks.
The foremost disruption the blockchain technology has had on the global market is through the financial industry. The emergence of cryptocurrencies has really seen some major changes in the financial sector; the fact that cryptocurrencies are decentralised in nature has seen them become quite popular among the people. This has seen the market capitalisation of all cryptocurrencies rise to reach $500 billion (Sh50 trillion).
As popularity grows, more and more people are now inclined towards the decentralised digital currency above the other traditional investments. In Africa, the case is the same. Many, especially the youth, who are now getting attracted to the cryptocurrencies are doing so by using them as a store of value in order to accrue a profit from them at a later date.
However, for Africa, the cryptocurrencies have the potential to do more than traditional media. For instance, most African countries rely on international markets for goods and services. As a result, African currencies usually lack stability as these countries mainly have to use the American dollar to transact. Henceforth, businesses are forced to exchange their currency for dollars whenever they want to do business internationally. This ends up affecting many businesses as the foreign currency reserves in most African countries are often limited.
The existence of cryptocurrencies could change this as it does away with the issue of limited foreign reserves. Using cryptocurrencies, businesses can transact without limitations. In addition, organisations will be able to profit as the cryptocurrencies act as a stable store of value as well as a protector against inflation due to their nature of being finite in supply. Cryptocurrencies also help by promoting cross-border trade with more people starting to accept cryptos such as Bitcoin and Ethereum as platforms of payment.
Cryptocurrencies are also challenging banks as they slowly decrease the power that banks have over the people. As a result, in Africa where many people do not have bank accounts, digital currencies will be able to provide the people with a more efficient and cost efficient option. This has caused many experts to believe that once cryptocurrencies are more stable they may replace banks in the economy.
For instance, according to Christine Lagarde, the head of the International Monetary Fund (IMF), Bitcoin and other cryptocurrencies will eventually replace banks and existing financial systems by eliminating the necessity for intermediaries and third party service providers.
Apart from affecting the financial sector, the blockchain technology has also ended up affecting other sectors of the economy. The phenomenon is slowly changing how some industries operate while at the same time it creates new ones. As an example, the technology can help transform the current outdated supply chain infrastructure into an effective better system.
Today’s current supply chain infrastructure is opaque in nature as information is rarely shared or accessible. This makes it very difficult to ascertain what goes into making a particular product. Additionally, the supply chain system is quite expensive and it mostly leaves resources either underutilised or unused. For example, many companies tend to hide information such as the processes and costs of the production of their products. As a result, this causes consumers to end up paying prices for the commodities that may not reflect the actual costs of production.
However, if the blockchain technology was to be implemented in the supply chain infrastructure then transparency would rule the day. Every time a product would move from point A to point B, it would be recorded and be available for access by both the parties. Apart from this, when goods are distributed, data such as history of the product would be available and parties will be able to effectively record and track their goods while ensuring they are highly secure.
This could especially help land-locked countries such as Uganda, which transports imports through road from the port of Mombasa as it helps them to be able to keep track of their products while they are in transit. In addition it also helps to reduce time delays that occur as well as minimize any human errors.
Blockchain technology may also help to reduce one of the biggest problems that is common in almost all African countries in the continent: the land problem. People have always complained about the long queues and excessive paperwork involved when it comes to land registry. This has left clients at the mercy of brokers who usually take the opportunity to overcharge the people making the whole ordeal expensive. This has also seen the rate of fraudulent cases increase where people have ended up losing their piece of land.
However, this can change with the implementation of the blockchain technology in land registry. This will do away with the endless paperwork as it will easily link one’s property with his/her information. Not only will this be able to reduce the cases of fraud as their will be clear proof of ownership, but it will reduce the cases of human error that are plenty in the current system.
This new technology has a lot more to offer the African continent in order to help it leapfrog the other continents and develop faster. As countries such as Belarus and Russia move forward and decide to incorporate the technology in their ways of life, it is time that Africa followed suite so as to reap the fruits that come with it. Blockchain technology is not a panacea but it is the best tool to fight corruption and inefficiency that have long affected the growth of Africa. ^