Blockchain technology has taken the world by storm. It has disrupted many industries including finance, healthcare, cybersecurity and even banking.
But what exactly is blockchain? Blockchain is a shared, decentralized ledger that records transactions on a computer system. It is highly secure, transparent and instant. In other words, the data cannot be changed. For this reason, it is used to track production, accounts, orders, and payments in healthcare, payment, and cybersecurity businesses.
Since transactions take place under a decentralized system, users do not incur any intermediary fees. In addition, it is open source software. This means that the source code is free and legally available for creating products and services. In addition, it supports peer-to-peer transactions allowing parties to conduct transactions directly without involving third parties.
The huge potential of Blockchain in Africa
The growth potential of blockchain is huge and according to the cryptocurrency forecasting agency CryptoPredictions.com, more and more Africans are choosing to invest in cryptocurrencies (Nigeria is currently leading on this front).
Digital inclusion, although a vector of real financial independence, is unfortunately currently lacking in many African countries. The continent can change dramatically by leveraging blockchain technology. Fortunately, countries like Ethiopia have taken a bold first step to invest in blockchain, creating a watershed for technology on the continent. Let’s explore how blockchain can bring change across various sectors in Africa.
In April, the Ethiopian government launched a program to provide national student databases on decentralized digital identity. The agreement signed by the Ethiopian government aims 5 million students in 3,500 schools. It is the biggest blockchain deal signed by the government.
The government works in partnership with Emurgo and IOHK. Both companies have been tasked with developing and maintaining the Cardano blockchain.
This is the first blockchain project focused on Africa. It shows how Africa can use blockchain to bring positive change to the continent in line with the United Nations Sustainable Development Goals and the goals of the African Union’s Agenda 2063. Providing digital identities is a step towards using blockchain for socio-economic change.
Promote trade and commerce
The growth of the decentralized finance industry is most intriguing. The financial system is gradually evolving towards a peer-to-peer system from banks and other intermediaries.
In 2020, African countries signed a continental free trade agreement that allows countries to trade without barriers. The region can use Blockchain technology, including bitcoin, to facilitate free trade. For example, currency inconvertibility is a major problem in African countries. This means that many African countries cannot trade or exchange currencies.
Blockchain could be a lasting answer to this problem and go a long way in promoting intra-regional trade. In addition, it can provide transparency in the management of the value chain, such as the distribution of pharmaceuticals. Blockchain will help achieve financial digitization in Africa, boosting the economy and improving service delivery.
Hyperinflation is a scourge that has affected the economies of many African countries. In particular, Zimbabwe is the most affected. Blockchain-based technology is a perfect solution to solving inflation in Africa. The benefits of adopting blockchain-based cryptocurrencies for countries experiencing massive inflation are manifold.
First, cryptocurrencies such as bitcoin are immutable and transparent, unlike other assets. In other words, it cannot be distorted, destroyed or deleted. This is different from fiat money which some economies can debase by free printing.
Bitcoin has positioned itself as an excellent asset for investment and store of value. It is a great option for transferring funds inside and outside the country, especially during a crisis such as hyperinflation. The good thing is that the cryptocurrency has withstood many tests, including devaluation, political upheaval, market turmoil, and the liquidity crunch. He gradually won over even the initially skeptical base. In fact, the data shows that bitcoin adoption has proliferated in high inflation countries.
Blockchain offers a realistic and bright future for African countries facing hyperinflation.
Another major benefit of particular interest is the fight against deep-rooted corruption in Africa. This can help bring transparency to financial management. Currently, central banks have the exclusive right to create and distribute money. Replacing this system with an immutable blockchain network is a perfect solution for underhand financial management.
It could help solve corruption like in Nigeria where fraud is rampant by making sure every coin is accounted for.
Financial market stimulation
According to World Economic Forum, Sub-Saharan Africa has 350 unbanked adults representing 17% of the global total. In addition, traditional financial services are marred by bureaucracy, bad policies, political instability and corruption. The decentralized nature of digital currencies is a much anticipated solution. Adopting virtual currencies and mobile money can make the way of doing business easier.
African countries are linked to the use of the US dollar and the euro for international transactions. Therefore, fluctuations elsewhere affect their national economies. The introduction of blockchain could prevent this dependence on other currencies. It’s no wonder that 15 digital currencies have been introduced to Africa in the past year. In South Africa in particular, the demand for these parts as well as for forex brokers no deposit bonus has been far from weak.
The proliferation of cryptocurrency due to blockchain adoption will boost the currency market. In addition, it will give more power to consumers. As a result, banks will need to improve their services through innovation to retain their customers. This will again bring positive changes to the financial market, which has lagged relatively behind.
Remember that many parts of Africa suffer from a lack of physical and financial infrastructure. Fortunately, blockchain thrives in such an environment. Africa can leverage blockchain technology to deliver financial solutions even to the most remote communities.
Improve government administration
Governments in African countries can use blockchain to improve service delivery. For example, the digital ledger can help monitor and manage health, education, and public service systems. This will go a long way in improving socio-economic development.
First, blockchain can be linked with artificial intelligence to improve operations and create transparency in data management. For example, the decentralized ledger can help track collection, follow-up assessments, and tax management.
Second, the government can use the distributed ledger to record property rights. This makes it easier for people to monitor the owner of their property. In fact, Ghana is already using blockchain to revolutionize the registration and transfer of ownership.
In countries where corruption is endemic, blockchain can help improve the efficiency and transparency of public procurement, making the system less susceptible to corruption. This involves automating the transfer of funds with the necessary controls to ensure that only accredited providers receive payments. In addition, technology can help track food distribution to reduce corruption in the delivery of food packages.
The Supreme Court of Kenya overturned the 2017 elections due to compromised voting machines. Adopting blockchain technology could help build transparency and trust in the voting process.
Pioneering companies in the use of blockchain in Africa
Distributed ledger technology could help overtake the African economy and help them enter the digital age. Businesses can use technology to develop smart contacts to improve the transfer of goods and services.
Some of the startups that are tackling African issues using blockchain include:
- Bitpesa- a B2B payment platform that supports bitcoin transitions
- Agriledger – Kenya starts using blockchain to connect farmers to buyers and take advantage of current market prices
- Twiga food – A company that offers logistics solutions by connecting farmers and buyers. In collaboration with IBM, Twiga offers a blockchain-based financial service
- Bitland -A startup that offers a secure and rewarding cadastre thanks to blockchain technology
- Bithub– a pioneer company for the blockchain service
Others include nairaEX, Luno, and BitcoinAfrica.io.
Africa can use blockchain to bring positive change
The Covid 19 pandemic has disrupted all business, including the supply chain system. Blockchain adoption offers a suitable solution that can help African countries to formulate robust supply chain systems. According to UNCTAD, governments can derive the maximum potential benefits from their policies by using blockchain and other cutting-edge technologies.
In Tanzania, they are already using blockchain to eliminate ghost workers who have consumed huge sums of money. Likewise, the Kenyan government uses blockchain to track the distribution of affordable housing for low-income citizens. South Africa uses technology for interbank transfers.
Currently, the African continent has just crossed out the service of goods that the blockchain can present. However, there is so much potential to benefit from the technology. Identifying the problems and associating them with blockchain solutions is one thing. However, most of the work is embracing the technology and ensuring that this solution is used on a viable and full scale.
For example, the lack of checks and balances on corrupt intermediaries in emerging economies has resulted in high transaction costs. Even countries with established institutions are reluctant to embrace new technology clinging to the status quo.
While blockchain is not the pinnacle of African financial problems, it is a compelling solution to global problems. However, there is still a long way to go for bitcoin to reach its full potential as a store of value and international transactions. It will particularly help countries affected by inflation in Africa. In a nutshell, the solution to most of the problems in Africa lies in the adoption of blockchain technology.