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Simphiwe Xulu
 
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7 things every South African should know about Cryptocurrency

18 June 2014, 11:30

If you’re interested in your financial future and are remotely concerned about how to manage it, a new phenomenon has entered the stratosphere of planet earth over the last 8 years called cryptocurrency – an exciting variation of digital money deemed to be the future of all currency as we know it.

Having exploded during the last 2 years thanks to the popularity of the Bitcoin currency, it’s exceptional platform for innovation and as well as its high profile scandals involving celebrities like Kanye West, cryptocurrency is currently one of the hottest topics in the international world of banking and technology convergence

I took some time out to interview a South Africa expert and Bitcoin trader (who requested to stay anonymous) who breaks down some basic information on what cryptocurrency is and how it could impact the lives of ordinary South Africans. This is not one for my tech geeks, but rather, an informative entry level article to explain cryptocurrency to South Africans who are currently not aware of its explosive potential

Could you explain cryptocurrency to the average South African in simple English?

I think they should learn more about their own currency first to get excited about crypto’s. Cryptocurrency is completely decentralized from both banks and governments - the benefit being no interference and little to no charges.

Cryptocurrencies are created for this purpose; to exchange ‘value’ from one person to another freely and on their own terms. Any person can create their own crypto coin, the first one being Bitcoin. But there are hundreds if not thousands of others. There is even a Madiba coin.

Bitcoin is famed for its “blockchain”. What is a blockchain and how does it work?                                                                        So if you were a bank, you would record all transactions on a balance sheet of some sort. The blockchain is that ledger for Bitcoin but the only difference is that it is public and viewable at any time.

These blocks continue to grow as peers of the Bitcoin network (called miners) relay and confirm transactions. If you think of a ‘block’ as a month represented on your bank statement, every time the ’block’ is full, it will move onto the next one continuously recording the transactions on the Bitcoin network.

With each ‘block’ completed, these ‘miners’ will earn Bitcoins by completing intricate mathematical problems. Every time a miner solves a problem, a 25BTC Bitcoin currency is awarded and added into circulation.

What would the average South African require currently to be able to trade in a prominent digital exchange currencies like Bitcoin? Please be specific. (i.e. internet connection, laptop, start-up capital?)

For internet you can use an internet café but obviously there could be some safety issues. But having a laptop or PC where you could store your Bitcoins offline is a bonus. In saying that, Bitcoin advocates do understand that 95% of Africans have mobile devices but not smart phones, so there are companies like 37Coins who are focusing solely on Bitcoin transfers for mobile users. This will take away most problems facing users today and in the near future. The ‘wallets’ needed to store or trade cryptocurrency are actually text files, so adapting to people’s needs shouldn’t be far off.

Would the establishing of a cryptocurrency exchange create jobs?

Indirectly it would. The exchange itself wouldn’t require many people to run it, but it’s the use of the currency itself that would bring change/jobs/growth by giving more power to the end user instead of the middleman.

Can cryptocurrencies re-address the way banks have been accommodating the disadvantaged?

I truly believe that they can, and they have already started. The one great thing about cryptocurrency is that it doesn’t discriminate between different races or creeds. Everyone appears as an algorithm looking to get on with their business.

This is a huge advantage, as I’m sure you know banks do discriminate based on job tittle to which area you live in, and can base their interest rates on these - often affecting the poorer and less able community.

That being said, banks have the processes and functions in place to be able to offer the same type of services, so either way, I believe the banks will have to take this onboard as serious competition and reform to the way they do business.

What could cryptocurrency look like in 10 years’ time?

To be honest, it’s impossible to predict that. In doing so, I would fall way short. I doubt the exchange process would change much because it’s simple and it works. But it’s what we can do using the currencies freely that could change everything.

A well-known Native American Indian tribe has even launched their own coin! This is just one way Bitcoin could shape the future - bringing back financial control to the most vulnerable of people.

The average South African is generally highly disadvantaged and he draws the thin line between limited access to resources and absolutely no access to technology & resources. What value can cryptocurrency add to those people lives?

Just one example - as I said before, the people we are referring to also have the highest rate of mobile usage in the world. If you properly teach them that by using cryptocurrencies through an sms-based service, they can send/receive money freely anywhere in the country/world - they will soon realize the savings they are making without charges/fees.

They could then learn that they could use that money to gain other resources and to better their way of life. I think giving freedom is the greatest gift.

Many thanks to my interviewee. To learn more about the basics of what Bitcoin is, click here

So, have we reached the last years of the financial system as we know it? Let me know what you think

Disclaimer: All articles and letters published on MyNews24 have been independently written by members of News24's community. The views of users published on News24 are therefore their own and do not necessarily represent the views of News24. News24 editors also reserve the right to edit or delete any and all comments received.
 

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