Being among the third world contintents, Africa is leapfrogging traditional and legacy banking payments systems in use in much of the developed World through fast adoption of mobile and internet based technology. Cutting edge blockchain technology such as Bitcoin has great potential in creating efficiency and disrupting traditional mechanisms for international trade, resource management, and governance where current transaction costs are high due to existing bottlenecks such as poor infrastructure, corruption and mismanagement of funds. However, huge challenges remain creating obstacles in the adoption of these innovative technologies worldwide.
Bitcoin in particular has in the recent past generated a lot of controversy with the Central Bank of Kenya issuing a public notice warning against the use of bitcoin as a currency within the country. While currency regulation and monetary policy is within the purview of the Central Bank, it is important to dig deeper into what could be the most revolutionary technology of our age and how best we can we move forward with ensuring Kenya and indeed the African continent exploits fully the opportunity that is now within our grasp (Technology).
Make no mistake Bitcoin and its underlying Blockchain technology will disrupt the current financial order that currently has Banking institutions sitting at the top of the food chain. Incumbents who fail to understand and implement strategies risk being rendered irrelevant akin to the manner in which Kodak was rendered irrelevant by the advent of Digital Cameras. Indeed Kenyan Banks have already had a taste of this with the arrival in 2004 of M-Pesa the Mobile Money platform that revolutionized the way Kenyans transfer money and pay for services within the country. Already it is estimated that 40% of Kenya’s Gross Domestic Platform is transacted on this platform. Banks and other financial institutions will need to evolve once again to keep up with this global trend.
Digital currencies and in particular crypto-currencies in general have evolved rapidly during the past eight years since the advent of bitcoin the World’s first truly decentralized crypto-currency. Bitcoin invented in the year 2007 by an anonymous person or entity known as Satoshi Nakamoto has forever revolutionized the way the transfer of value occurs between two or more parties who do not trust each other. The space continues to evolve rapidly with hundreds perhaps thousands of crypto-currencies being created every day, most of which are either irrelevant or scams that offer little or no value to society.
Bitcoin the World’s first Decentralized Crypto-Currency is quickly positioning itself as the Internet of Money; a platform that will allow for instantaneous, immutable and secure exchange of value almost for free and at any given time. Bitcoin possesses 4 key distinct characteristics that will allow for this transformation to occur namely:
- Bitcoin the Blockchain; the distributed open ledger maintained and safeguarded by the network of miners i.e. Computers that ensure transactions cannot be forged.
- Bitcoin the Currency; the digital token used for transactions and to reward miners who secure the network and Blockchain.
- Bitcoin the Protocol; the digital network used to carry bitcoin currency transactions across the network.
- Bitcoin the Software; the open source code allowing for extensible and evolution of the platform in the future. Read the Bitcoin Whitepaper here.
Elani on Corruption at MSCK. Can the Blockchain solve this problem?