Blockchain is not just about cryptocurrency. Blockchain technology could help remove intermediaries in Africa’s value chain, create opportunities for small farmers and bring more transparency to markets. It can also provide services that are cheaper than existing ones, especially when it comes to remittances, trade finance, and cross-border digital payments. This would enable people in Africa to create, retain and benefit from their transactions.
What is Blockchain, and why is it important for Africa’s development?
A blockchain is a decentralized log of all transactions across a peer-to-peer network. By decentralizing, we mean that users can validate transactions without the assistance of a central clearing body. In addition, data stored on a blockchain cannot be altered. The Blockchain’s uniqueness lies in ensuring the accuracy and security of a data set without relying on a third party.
Blockchains provide an authoritative record of all transactions that have taken place on the network. This novel technology can be used to efficiently implement several different types of services, including financial exchanges and voting systems. There are many potential benefits to shared ledgers: decentralized execution, end-to-end transaction processing (e.g., no need for an intermediary), less complexity in system design and operation, and increased transparency.
Africa, a continent with over 50 countries and a combined population of about 1 billion people, is home to many fast-growing economies. Yet, many African citizens still lack access to the essential financial services that would enable them to participate in this growth. With more people owning smartphones, telecommunication companies are beginning to explore mobile money services that allow Africans to transfer money without paying commissions or incurring transaction costs.
A blockchain-based financial infrastructure could transform the continent’s value chains. For example, blockchain-based financial applications could make sending money home more affordable and increase the availability of credit for small farmers.
Through blockchain technology, distributed ledgers can be created, which are public databases holding information permanently in multiple copies that exist on thousands or millions of computers simultaneously. These records can only be updated by adding new data to a ledger while ensuring that all copies remain perfectly synchronized. Furthermore, this data is stored in a decentralized, digital format and cannot be controlled by any single entity.
Blockchain technology could help African policymakers respond more quickly to fiscal policy changes, manage economic shocks resulting from commodity price swings more effectively, and improve aid flow monitoring for corruption or misuse. Doing so can help improve governance and achieve the Sustainable Development Goals (SDGs).
There are many potential applications of blockchain technology, including energy management (smart grids), health care (vaccine tracking), education (online degrees and accreditation systems), cross-border payments (remittances for migrant workers), property registry, voting, digital identity management, and forecasting markets.
The opportunities that distributed ledger technologies (DLTs) offer Africa are unprecedented. The technology can be used to record all transactions and manage all documents such as the title deeds of property, educational qualifications, or medical records.
How can Blockchain be used to increase transparency and trust in business dealings?
In business, trust and transparency are essential for successful transactions. The blockchain technology can be used to enhance transparency and trust in business dealings by providing a secure, public ledger of all transactions. In addition, it allows businesses to track the movement of funds and verify the authenticity of records.
Additionally, blockchain technology can create Smart Contracts that automate the execution of contracts once certain conditions are met.
Blockchain tech reduces the need for third-party intermediaries. It helps to ensure that both parties uphold their end of the bargain. As more businesses adopt blockchain technology, it will become increasingly difficult for dishonest actors to engage in fraudulent activities.
Blockchain technology has been introduced to the financial markets with distributed ledger technologies that enable multiple parties to access and update a shared digital record simultaneously.
In essence, this means that blockchain technology can replace several functions currently performed by intermediaries such as brokers, exchanges, vendors, Clearing House Interbank Payments System, SWIFT, and Central Counter Party Clearing.
This can be accomplished by using smart contracts, which are self-executing contractual states stored on the Blockchain that execute when specific conditions are met.
For example, a smart contract could be programmed to release money once a product had been received or if certain performance conditions had been met. As soon as the contract is deployed, it is immutable and independently verifiable.
Smart contracts are particularly useful for businesses because they provide greater transparency and cut out inefficiencies associated with using third-party intermediaries.
How Blockchain can help stimulate economic growth in Africa
Africa is home to 54 countries and contains the most diversified mineral resources on the planet. But unfortunately, many of these minerals have not benefited the people living in these African nations.
The mining sector in Africa is plagued with difficulties, but the Blockchain can eliminate several of these issues. For example, in many African nations, national governments are unaware of the amount of minerals that leave their shores.
The problems of record-keeping, traceability, and management of the whole supply chain will be immediately addressed by the application of distributed ledger technology. Additionally, the Blockchain can enforce standards that adhere to international agreements on the mining, processing, marketing, and distribution of minerals and their derivatives.
A government can identify who has been granted mining licenses, who have started operations, and which firms are not included in the country’s database of mining licenses in a moment.
Records are kept securely and can’t be tampered with or subjected to fraudulent accounting methods. No one controls the system, and everyone who wishes can view the records. Transactions can be verified and validated. Mining firms’ tax documents may be retrieved immediately. Incontrovertible evidence of misconduct may be gathered swiftly in the mining sector, making prosecution of errant parties a lot easier.
Financial Benefits from using Cryptocurrencies
There are numerous benefits to using cryptocurrencies. Cryptocurrencies offer privacy, anonymity, and borderless transfer of value across the globe with little/no fees associated with processing transactions. These benefits can be obtained without trusting third-party intermediaries like banks or brokers. Besides, there are no interest rates associated with using cryptocurrencies.
The main benefit of cryptocurrencies is not relying on third-party financial institutions. This benefits everyone who uses banks because these entities are well known for taking every penny through fees and other costs.
One such example is World Media Token (WMT). This is a utility token created to link the disconnected and bank the unbanked. World Mobile wants to offer a ground-breaking, scalable network across Africa and beyond, suggesting that a stronger connected Africa will benefit everyone and provide intrinsic value.
Another way cryptocurrencies save people money is by decentralizing the entire transaction process during a transaction. As a result, transactions occur between users directly without having to incur unnecessary fees associated with transferring funds from one account to another or even through currency conversions.
The challenges of implementing blockchain technology in Africa
One challenge is that many people in Africa do not have access to the internet, so they cannot use blockchain technology. Another challenge is that most Africans do not have the smartphones needed to use blockchain technology. Lastly, many Africans do not know how to use blockchain technology, so they need to be taught how to use it.
The potential for Blockchain to revolutionize the African economy
Blockchain technology has wide-reaching implications for the African economy. The lack of trust in traditional systems hinders economic growth and development on the continent. This gap could be filled by Blockchain, which has been hailed as revolutionary for its ability to increase transparency and reduce corruption.
In addition, payment with mobile phones opens up new frontiers for people who have previously had difficulty accessing or understanding banking relationships or digital ledgers because of low literacy rates or inadequate hardware like smartphones. Technology offers an alternate form of currency that may prove helpful in emerging markets where local currencies are volatile due to inflation and depreciating purchasing power. Cryptocurrencies could be a practical solution to the issue of trust in Africa.
Particularly for countries under sanctions, trading with cryptocurrencies would make it easier to continue business as usual without worrying about interference from external sources. For instance, Angola was able to circumvent Western sanctions by switching from using the US dollar as its currency of choice to its own digital currency, the Kwanza coin. Crypto has been gaining momentum throughout the continent – Zimbabwe officially recognized bitcoin as a means of payment last May. Tunisia recently announced plans to launch a “state-sponsored” cryptocurrency that may only be available to citizens at first.
The benefits that blockchain technology can have on an economy are not limited to finance alone. For example, the cryptography behind Blockchain is widely expected to reduce government corruption by providing an immutable public ledger.
According to Transparency International, over two-thirds of all African countries are considered highly corrupt. Blockchain could be the solution to this problem. Instead of requiring trust that each politician or civil servant is honest, Blockchain creates a system where every action executing on the network is logged and cannot be altered.
From banking to politics, Blockchain has implications across many sectors in Africa. While it will take time before the continent arrives at a consensus regarding implementation strategies, most policymakers still prefer slower but more tested technology such as biometrics, and its potential is here to stay.
Another area where Blockchain can offer benefits is in the area of education. This month, the University of Ghana announced plans for a blockchain-based certificate management system. That means that once students finish their coursework and graduate, they can use their blockchain account to access all of their academic certificates without physically requesting them one at a time, saving them time and helping them secure better employment opportunities.
Other changes are already in place, too – the UN is running an African Blockchain Lab to use blockchain technology as an incentive to fight climate change with carbon credits.
Blockchain creates trust by offering transparency, which is especially important in Africa, which has hindered development for so long. It will undoubtedly provide new ways for Africa to innovate and improve its economy without taking shortcuts or cutting corners. While the continent still has a long way to go in widespread use and mass adoption, Blockchain has implemented itself as an integral part of Africa’s future.