There's definitely a blockchain revolution happening in Africa. In 2015, when I started my journey into blockchain and cryptocurrency in Africa, most people thought I had lost my mind. It was as if I spoke a medieval language, uttering words like “Hashing”, “Crypto”, “Blockchain”, and “Internet-level consensus.”
Fast forward, three years later, and thousands of miles across the continent, the story is different. A growing community of people across the continent are as passionate about the blockchain revolution.
People often ask for the reason for such radical change within a short time. My answer usually is that those who suffer the greatest pain need the doctor the most. Africa definitely needs the blockchain technology, and quickly at that.
There are several issues on the continent; from poor governance, corruption, poverty, lack of transparency and a host of others. However, there is a strong can-do spirit on the continent, young entrepreneurs who with shoe-string budgets are keen to take on the world and make a difference. These are the ones that I say need the doctor the most.
To be clear, Africa is still far from adopting blockchain technology. Central banks and other major financial institutions on the continent are yet to fully adopt the blockchain technology as at December 2017. But, the signs are very encouraging.
Central banks are studying the technology and running pilots at the moment. Commercial banks are beginning to ask the right questions and their decision makers have started to pay attention. Fintech companies are launching apps and integrating to various blockchain platforms.
However, the vast majority are speculators who bet on the price movement of cryptocurrencies. This is understandable given the stupendous, mind-blogging growth rates of 30x, 300X, 3000X in the cryptocurrency world in 2017. A bull run on steroids!
What will 2018 bring in the crypto-world? Same crypto-craziness as seen in 2017? or, would it be the calm after the storm? Opinions are divided on what 2018 will bring. Some financial experts expect the bull run to continue.
The first few days of 2018 have not disappointed so far. Though the conservatives have begun to have flashbacks of the late 90s internet bubble. Yet, irrespective of the direction of cryptocurrency price levels, one thing is clear, the blockchain technology is here to stay. It can no longer be ignored.
Savvy financial market players including central banks, commercial banks, remittance companies and fintech companies have realized that they can no more than stand on the sidelines and wait for things to unfold. They need to be active participants in the blockchain revolution. These firms have begun investigating what blockchain platform in the morass of blockchain platforms meets their needs and gives them the desired competitive advantage going into 2018 and beyond.
Though a seemingly daunting task to pick the right blockchain, there are a number of parameters that will help serious institutions make the decision faster.
A blockchain must have a clear utility. In simple terms, the blockchain should actually solve a business problem. And, solve it better than existing solutions. Savvy institutions must be convinced that the blockchain they adopt solves a problem for them, as opposed to being a solution seeking a problem.
Some problems currently being solved by blockchain include simplifying cross-border payments, streamlining trade financing and treasury management; enabling interoperability cross different financial platforms and a host of others. This is the Holy grail; if it does not solve a problem for you then it is a problem to you.
The blockchain must have in-built compliance capabilities. The entire financial sector runs on compliance. So, if the blockchain does not offer that capability or if it is an add-on then it will inherently not address the requirements of serious players in the financial sector.
Cost of a transaction is a major requirement. Transactions in Africa are quite high; in fact, it’s the most expensive region to send monies to and from. It’s a paradox that the poorest continent, lowest GDP/cap, pays the most for transactions. The blockchain has to be low cost (or preferably no-cost), just like the internet which is essentially free to use.
The speed of transaction must be instant or near instant. It’s of no use having a blockchain where you have to wait minutes, hours or days for a transaction to be executed. Time is indeed money.
A big barrier to adoption of most blockchains by central banks and financial institutions is that they are not comfortable with adopting cryptocurrencies that they have no control over.
A key function of the central bank is to establish and implement monetary policies. So, with a cryptocurrency that they did not create, they are at a loss as to how they can control it. Hence, several central banks like the Bank of England, the UAE central bank etc. are looking to launch their own digital currencies.
Scalability is the sixth consideration. This is non-negotiable, the blockchain must be able to scale, it must be able to compete with the likes of Visa, MasterCard and other global payment networks on a number of transactions processed per second.
Another requirement is a team behind the blockchain. They must be tried and tested. Financial players are custodians of millions and in some cases billions of dollars of other people’s money. So, it is extremely important that they deal with tried and tested players in the industry.
Partnerships are being formed in the industry with established players such as IBM and others who have strong reputation for safety and security. These partnerships help assuage the concerns of financial market players.
This is by no means an exhaustive list but it hopefully will help serious financial market players ask the right questions before adopting individual blockchain technologies.
While 2017 was the year of the blockchain bull-run, 2018 will most likely be the year of the blockchain utility. Savvy African central banks, commercial banks, remittance companies and fintechs will not want to miss this opportunity to lead this new era of change.