Blockchain technology has taken the world by storm. It has disrupted numerous industries, including finance, health, cybersecurity, and even banking.
But what exactly is blockchain? Blockchain is a shared, decentralized ledger that records transactions across a computer system. It is highly secure, transparent, and instant. Put differently, data can’t be modified. For this reason, it is used to track production, accounts, orders, and payments in healthcare, payment, and cybersecurity firms.
Since the transactions occur under a decentralized system, users do not incur any intermediary fee. Additionally, it is open-source software. This means the source code is free and legally available for the creation of products and services. What’s more, it supports peer-to-peer transactions allowing parties to transact directly without using third parties.
The potential for blockchain growth is massive and according to cryptocurrency forecasting agency CryptoPredictions.com, more and more people from Africa opt to invest in cryptocurrencies (Nigeria is currently in the lead on this front).
Digital inclusion, albeit a conduit for real financial independence, is unfortunately currently missing in a lot of African countries. The continent can significantly change by leveraging blockchain technology. Luckily, countries like Ethiopia have made a bold initial move to invest in blockchain, creating a watershed moment for the technology in the continent. Let’s explore how blockchain can bring change in various sectors in Africa.
In April, the Ethiopian government rolled out a program that aims to provide national student databases of decentralized digital identity. The deal signed by the Ethiopian government targets 5 million students in 3500 schools. It is the biggest blockchain deal signed by the government.
The government is working in partnership with Emurgo and IOHK. The two companies have been tasked with developing and maintaining the Cardano blockchain.
This is the firsts Africa-focused blockchain project. It shows how Africa can use blockchain to bring positive change to the continent in line with UN sustainable development goals and African union agenda 2063 goals. Providing digital identities is a step towards using blockchain for socioeconomic changes.
The growth of the decentralized finance industry is the most intriguing. The financial system is gradually shifting to 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 instance, currency inconvertibility is a massive problem in African countries. This means that many African countries can’t trade or exchange currencies.
Blockchain could be a long-lasting answer to this problem and go a long way to promote intra-regional trade. Also, it can bring transparency in the value chain management, such as the distribution of pharmaceutical products. Blockchain will help achieve financial digitization in Africa, boosting the economy and enhancing service delivery.
Hyperinflation is a plague that has affected numerous African countries’ economies. Notably, Zimbabwe is the most affected. Blockchain-based technology is a perfect solution for solving inflation in Africa. The benefits of adopting blockchain-based cryptocurrencies for countries experiencing massive inflations are manifold.
First, cryptocurrencies such as bitcoin are immutable and transparent, unlike other assets. In other words, it can’t be distorted, destroyed, or deleted. This is unlike fiat money which some economies can debase through wanton printing.
Bitcoin has positioned itself as an excellent asset for investment and store of value. It is a great option for transferring funds in and out of the country, especially during a crisis such as hyperinflation. The good thing is that the cryptocurrency has withstood numerous tests, including devaluation, political upheavals, stock market disruption, and liquidity crisis. It is gradually appealing even to the initially skeptical base. In fact, data shows that bitcoin adoption has proliferated in countries that have high inflations.
Blockchain provides a realistic and bright future for African countries faced with hyperinflations.
Another massive advantage of particular interest is tackling deep-rooted corruption in Africa. It can help bring transparency in financial management. Currently, central banks have the sole right to create and distribute money. Replacing this system with an immutable blockchain network is a perfect solution to underhand financial management.
It could help solve corruption like in Nigeria, where fraud is rampant by ensuring every coin is accounted for.
According to the World Economic Forum, Sub-Saharan Africa has 350 unbanked adults representing 17% of the global total. Moreover, traditional financial services are marred by bureaucracies, poor policies, political instability, and corruption. The decentralized nature of digital currencies is a much-awaited solution. Embracing virtual currencies and mobile cash can ease the way of doing business.
African countries are pegged to using the US dollar and Euro for international transactions. Therefore swings elsewhere affect their national economies. The introduction of blockchain could prevent this dependence on other currencies. It is no wonder about 15 digital currencies have been introduced in Africa in the past year. Particularly in South Africa, the demand for these coins as well as for forex brokers with no deposit bonuses has been far from low.
The proliferation of cryptocurrency due to blockchain adoption will stimulate the currency market. Moreover, it will give the consumers more power. As a result, banks will have to enhance their services through innovation to retain customers. This again will bring positive change to the financial market, which has relatively lagged.
Remember, many parts of Africa suffer from a lack of physical and financial infrastructure. Luckily, blockchain thrives in such an environment. Africa can take advantage of blockchain technology to offer financial solutions even to the remotest communities.
Governments in African countries can use blockchain to enhance service delivery. For instance, the digital ledger can help monitor and manage healthcare, education, and public service systems. This will go a long way to improve social-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 the collection, monitoring evaluations, and tax management.
Secondly, 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 property registration and transfer.
In countries where corruption is rampant, blockchain can help enhance public procurement efficiency and transparency, making the system less susceptible to corruption. This involves automating funds transfer through necessary checks to ensure only accredited suppliers receive the payments. Also, the technology can help to track food distribution to cut corruption in the supply of food packages.
Kenya supreme court nullified elections in 2017 because of compromised voting machines. Adopting blockchain technology could help instill transparency and trust in the voting process.
Distributed ledger technology could help leapfrog African economics and help them enter into the digital era. Companies can use the technology to develop smart contacts to enhance the transfer of goods and services.
Some of the startups addressing African problems using blockchain include:
Others include nairaEX, Luno, and BitcoinAfrica.io.
The Covid 19 pandemic has disrupted any business, including the supply chain system. Adoption blockchain offers a suitable solution that can help Africa countries formulate robust supply chain systems. According to UNCTAD, governments can achieve maximum potential benefits of their policies by using blockchain and other frontier technologies.
In Tanzania, they are already using blockchain to eliminate ghost workers who consumed massive amounts of money. Similarly, the Kenyan government uses blockchain to keep track of the distribution of affordable housing for low-income citizens. South Africa is using the technology for interbank transfers.
Currently, the African continent has just scratched the service of goods that blockchain can present. However, there is so much potential to benefit from the technology. Identifying problems and matching them with blockchain solutions is one thing. However, the most work lies in adopting the technology and ensuring this solution is used on a viable and full scale.
For instance, the lack of checks and balances on the corrupted intermediaries in emerging economies has caused high transaction costs. Even countries with established institutions are reluctant to adopt the new technology clinging to the status quo.
While blockchain is not the pinnacle of African financial problems, it is a compelling solution for world problems. However, there is a lot to be done to ensure bitcoin attains its full potential as a store of value and international transactions. It will particularly help the inflation-affected countries greatly in Africa. In a nutshell, the solution to most problems in Africa lies in the adoption of blockchain technology.
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