Interest in Bitcoin among African traders is on the rise and it could all have to do with the upcoming Bitcoin halving, which is just hours away.
BTC trading in Sub-Saharan Africa has seen a historic upswing in the last week according to data from analytics site Useful Tulips. Trading across peer-to-peer platforms has reached all-time highs, even surpassing the peak of the 2017 bull run.
P2P Bitcoin trading in Kenya, Ghana, and the Central Africa region reached record-breaking levels last week while Nigeria came very close to breaking its previous record as well.
Nigeria still leads the continent in terms of Bitcoin trading, with some $7.2 million exchanged during the last week. Kenya comes a distant second with $1.6 million exchanged while South Africa sits third with 1.1 million traded during the past week.
Bitcoin halving sparks speculation
Experts say this surge is driven largely by expectations derived from Bitcoin halving scheduled to take place sometime on May 12. It is an event which only happens once every four years, in which the Bitcoin network halves the rewards going to miners in order to reduce the total supply over time.
The anticipation is that the drop in supply could drive Bitcoin’s price further even in the coming months.
“This change will have two effects on the crypto ecosystem,” said Chuta Chimezie, Founder of Blockchain Nigeria User Group, a private blockchain community forum.
“Bitcoin‘s scarcity will increase, while the Bitcoin-earning potential for miners shrinks. It will also bring an increase in regular transaction fees paid by users and Bitcoin will have a lower inflation rate than gold.”
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Inflation and weak currencies driving Bitcoin adoption in Africa
Bitcoin’s third halving comes at a time when the world is grappling with the economic strife brought on by ongoing coronavirus pandemic. Africa is particularly impacted given the rampant inflation and devaluation of several currencies across the region.
The World Bank has warned that Sub-Saharan Africa is heading towards its first recession in 25 years, falling from 2.4% economic growth in 2019 to -5.1% in 2020.
“Real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies—Nigeria, Angola, and South Africa—as a result of persistently weak growth and investment,” the World Bank said.
The consequences of inflation can be devastating, and cryptocurrencies like Bitcoin offer an opportunity to stabilize African economies. It is no surprise then that citizens of countries in Africa battling high inflation are opting for Bitcoin. Cryptocurrencies are used as a store of value, for speculation and, increasingly, as a medium for borderless trade across countries.
Another reason behind the spike in the growth of cryptocurrency on the continent is the lack of regulation, though there is no guarantee that governments will not change their current mindset.
Lack of a predictable legal framework for cryptocurrency results in confusion in the market, giving way for crypto-related scams and Ponzi schemes to flourish. In order to promote the use of blockchain, outside of cryptocurrencies, businesses and governments must work together.
All across Africa, there’s a lot of activity to increase the awareness of blockchain and cryptocurrencies. Several organisations, including the Blockchain Association of Africa, Aeternity Hub Africa, BitHub Africa, Blockchain Nigeria User Group among others, have come up to educate Africans about this emerging technology.
The problem, however, is that Africans are seen as platform users rather than creators—a situation many African “techpreneurs” want to change.
“I think we should start looking for how to be active stakeholders in the multibillion dollar Bitcoin industry,” said Chimezie.
He says that his company is building an infrastructure that would enable businesses to accept Bitcoin payments conveniently by leveraging Lighting Network protocol. The idea with the Lighting Network is to enable both low transaction fees for smaller Bitcoin payments and liquid cryptocurrency— removing the need to create an alternative cryptocurrency network with a new token.
“Lightning Network payments will become significant in the post halvening era and we want to help as many people as possible to set up and run their own Bitcoin Nodes using Raspberry pi 4 devices,” he added.
Can Africa create the future of its own blockchain industry?
Boulevard Aladetoyinbo, a blockchain securities lawyer at Lex Futurus Group, thinks so. Boulevard—who also represents Nigeria at the International Organisation for Standardization (ISO)—believes that the African tech ecosystem is too dependent on foreign blockchain platforms.
“One of the painful realities is that Africa-focussed projects leverage foreign DLT platforms such as Waves, the Turing-complete Ethereum Virtual Machine, Tezos, Algorand etc. to create crypto-assets, write smart contracts, build Dapps and the likes. This isn’t good enough because all it means is that Africa is a platform user rather than a platform owner”, he said.
The ISO is currently working on a series of blockchain and DLT standards that will guide how these technologies are harnessed across the globe.
Many industry watchers believe Africa has the potential to lead the way on blockchain adoption. Africa may have arrived late in the digital economy but that slow progress comes with certain competitive advantages. It benefits from advances and mistakes already made by developed nations. Its population is younger than that of any other continent. Its marketplace amounts to a new frontier.
Furthermore, the emergence of blockchain coincides with the ubiquity of mobile phones throughout the continent, as well as the arrival of high-speed Internet—which, as recently as a decade ago, was rare in most of Africa.
These are some of the reasons why Africa is suited as a giant sandbox for blockchain and crypto development.
Boulevard is currently advising the Bantu Blockchain Foundation on how to bring their project to life. Bantu Blockchain is the first blockchain platform built by Africans, thought its launch data has not been confirmed.
“With initiatives like the Bantu blockchain managed by the Bantu Blockchain Foundation (BBF), a new equation is destined to replace the status quo,” he adds.