The use of cryptocurrencies is significantly altering commercial activity in developing African nations. Here, we will talk about how crypto is changing the game in developing African Countries.
Cryptocurrency is a type of digital currency that uses cryptography to make sure transactions are safe and valid and to control how many new units are made. Traditional currencies are issued by central banks.
Cryptocurrencies, on the other hand, don’t have a central bank and don’t need one to work. They are based on blockchain technology, which is a distributed ledger that records all transactions in a clear and safe way. Bitcoin is the most well-known cryptocurrency, but there are now thousands of others in circulation. Cryptocurrencies can be used to buy goods and services, trade on financial markets, and make bets.
The adoption of cryptocurrencies, or digital currencies, is expanding rapidly across Africa. Economists believe it will flourish across the continent because it is a disruptive invention.
Cryptocurrency is decentralized and accessible from everywhere thanks to the internet and a distributed ledger maintained by a network of computers known as the blockchain.
Unlike traditional payment systems like Visa or Mastercard, cryptocurrency transactions are instantaneous and decentralized around the globe thanks to the widespread availability of the internet.
Bitcoin is the most popular cryptocurrency in Africa, followed by Litecoin, XRP, Dash, Lisk, and Monero. Bitcoin, which was developed in 2009 by an anonymous group using the name “Satoshi Nakamoto,” is a digital currency that some hope may replace traditional banking systems.
How Crypto is Developing African Countries
World Bank reports that the inflation rate in South Sudan was 102% between September 2016 and September 2017. Egypt, Ghana, Malawi, Mozambique, Nigeria, Zambia, and Zimbabwe all have inflation rates in the double digits.
Some of these countries unsurprisingly have some of Africa’s largest Bitcoin economies. According to gobitcoin.io, a news site dedicated to Cryptocurrency in Africa, the most active Cryptocurrency markets are in Botswana, Ghana, Kenya, Nigeria, South Africa, and Zimbabwe. According to the BBC, acceptance of cryptocurrencies is growing in Uganda.
Here are some of the ways crypto is developing African Countries;
- Low transaction cost
- Access to financial services
- Remittances
- Decentralization
- Security and transparency
Low transaction cost
The use of intermediaries like banks, payment processors, and other financial organizations can add substantial fees to traditional financial transactions in underdeveloped countries. Many individuals and businesses in Africa may not be able to afford the fees that these middlemen generally charge for their services.
In contrast, cryptocurrency transactions are verified and processed through decentralized networks, which completely removes the need for middlemen. Since there are no go-betweens required for cryptocurrency transactions, no costs are incurred. Instead, cryptocurrency is used as the medium of exchange in transactions that are executed directly between the parties involved.
Cryptocurrencies are lowering the barrier to entry for monetary transactions in Africa, especially for small enterprises and individuals who do not have access to conventional banking services. Because of this, more people in African countries will be able to join the formal sector, which could boost economic growth and financial inclusion.
Access to financial services
In many African countries, especially in rural areas where physical infrastructure may be lacking, access to conventional banking services is limited. This can make it tough for people and businesses to get the bank accounts, loans, and insurance they need to function.
To avoid the requirement for a typical bank account, cryptocurrency can be used to store assets, make payments, and even gain access to credit. Mobile phones and internet access, both of which are on the rise in Africa, are all that’s needed.
By facilitating cross-border transactions independent of intermediaries like banks or payment processors, cryptocurrencies can also provide a way for people in Africa to take part in the global economy. For small firms that rely on exports to expand their operations, this can be crucial information.
Financial inclusion may have far-reaching effects on economic growth and development in African countries, and cryptocurrencies are helping to promote financial inclusion by giving an alternate means of accessing financial services.
Remittances
When people who are currently living and working in another country send money back to their home country, this is called remittance.
Millions of individuals in a number of African countries depend on money sent home by family and friends living abroad. Traditional remittance services, on the other hand, can be time-consuming, costly, and subject to hefty fees, making it difficult for people to get their hands on the money they need.
If you need to transmit or receive money quickly, cheaply, and securely, you may want to consider using cryptocurrency. This is because cryptocurrency transactions are processed through decentralized networks, cutting out the middleman and lowering associated costs.
Individuals in African countries might benefit greatly from the use of cryptocurrencies to send and receive remittances because of the increased speed and decreased cost that comes with doing so. The decentralized and encrypted nature of cryptocurrencies also makes them a safer and more trustworthy way to send money, which can help cut down on instances of fraud and corruption.
The use of cryptocurrencies for remittances has the potential to enhance economic development and financial inclusion in African countries by facilitating easier and cheaper access to the money people need to support themselves and their communities.
Decentralization
The term “decentralization” describes the fact that digital currencies are not managed by a governing body or a single bank. They rely instead on distributed networks that are not governed by a single authority.
Because of corruption, inflation, and political instability, the people of many African countries may have little faith in centralized authorities like governments and banks. Cryptocurrencies are a decentralized alternative to traditional fiat currencies that can be used to access and transact in the financial system.
Cryptocurrencies allow people in Africa to make transactions independently of centralized entities like banks and payment processors by removing the need for these middlemen. This can be especially useful in places where people don’t have a lot of faith in or access to conventional banking services.
Furthermore, cryptocurrency transactions are more trustworthy than traditional financial services because they are based on secure and transparent blockchain technology. Providing a more easily accessible, transparent, and safe method of performing financial transactions, can aid in promoting financial inclusion and economic progress in African countries.
The decentralized nature of cryptocurrencies has the potential to foster greater financial autonomy and independence for people in Africa, which can be a formidable weapon for economic development and empowerment.
Security and transparency
Cryptocurrencies are based on complex cryptographic algorithms that are extremely difficult for hackers and fraudsters to crack. Particularly in nations where conventional financial systems may be vulnerable to corruption, fraud, or other forms of criminal activity, this offers a very high level of security and protection for consumers.
Cryptocurrencies give citizens of African countries more assurance in the safety of their monetary transactions, which in turn can boost economic development and stability.
Blockchain is the technology behind cryptocurrencies; it is a distributed ledger that records transactions in a public and unchangeable way. This means that everyone with access to the network can see and verify all transactions.
This kind of openness can be especially useful in nations where corruption and secrecy are widespread problems. People in African countries can increase their trust in the financial system and their own personal financial security by making use of cryptocurrencies like Bitcoin.
Cryptocurrencies, thanks to the security and transparency they provide, have the potential to be a major catalyst for economic growth and development in Africa.
Final Thoughts
Crypto is definitely aiding development in African countries in diverse ways. With crypto in place, there is no telling the level of development that is attainable by developing African countries.
