The Bitcoin rush around the world has raised many legitimate questions about what the cryptocurrency is all about and how it can be beneficial to individuals, organisations and governments. And rightly so, as we have seen over the past couple of months a substantial rise in demand, price and utility of Bitcoin across several sectors around the world.
If we consider countries like Nigeria, South Africa and Kenya where Bitcoin has granted many citizens freedom to create, manage and grow their wealth without stress, we can understand in part why many are turning to cryptocurrencies amidst instability in governance and economies in COVID-destabilised world.
However, coming home to Zambia where cryptocurrencies have not yet made as much impact, one may wonder what the implications would be if Bitcoin were to become commonplace and widely accepted. We will look at this but first, what is Bitcoin and what makes it special?
What is Bitcoin?
Bitcoin is a type of digital currency. What that means is that unlike the kwacha that is printed on paper, Bitcoin is purely electronic and can only exist in a digital form. As a cryptocurrency, other than being digital and encrypted, another particularly notable feature of Bitcoin is its decentralised nature, meaning that it is not controlled by an entity or government. Rather, millions of people around the world who operate powerful computers referred to as nodes all contribute to the smooth functioning of the Bitcoin network. This decentralised nature of Bitcoin is a huge advantage to the world considering the many hurdles we’ve had to face this past year.
To put this in perspective, consider the past year and the woes that came with COVID-19, including country-wide lockdowns and the closure of businesses. This caused major problems for the economies of many countries, forcing some into a recession. To deal with the recession, since the government controls fiat currency, they usually decide to print more money. The implication of this is that it often leads to inflation as Zambia and many other countries have experienced, and the purchasing power of that fiat currency is lowered. That means that you can have more money but you can’t buy as much as you used to buy with it.
With Bitcoin, this is different.
The need for Bitcoin
Money came to be because it solved a problem with transacting. But beyond that, money has also become a tool to create wealth. We often do this by saving or investing, hoping that we can have more money in the future when we need it. But over the years, using money for these purposes has become harder with issues such as exorbitant transaction fees, inter-border regulations and basic lack of trust causing major issues for the average Zambian or even organisations.
Imagine setting a particular sum aside for a few years only to discover that it worths less than it did when you saved or invested it. Rather than helping people create wealth and plan for a better future, many have found it difficult to attain financial freedom even after they have done everything right.
Fiat currencies, as wonderful as they have been for centuries may just not be the answer to the same questions in the fast-changing world we live in today.
Benefits of Bitcoin to Zambians
The following are ways that Zambians can use Bitcoin to ease their everyday financial needs.
- Cheaper transaction fees – Traditional banking systems and money transfer companies have come a long way in solving the problem of sending money from one place to another. But a major deterrent of these channels is the exorbitant fees they attract. Not that banks and the likes of MoneyGram of Western Unions deliberately hike fees but as there are different processes involved in sending fiat money especially across borders, the operational cost cannot but be high.
This is where Bitcoin comes into play. By design, the Bitcoin network allows you to send bitcoins to anyone regardless of where they are in the world at a very small network fee. This is possible because checks that are manually carried out with traditional banks are automated on the blockchain, making it easier to confirm the existence of an amount being sent and ensuring it gets to its destination securely.
- Faster transactions: Another good thing about Bitcoin is that transactions on the Bitcoin network are usually completed in about 10 minutes, regardless of where in the world you are sending Bitcoin to. This, again, is possible due to Bitcoin’s decentralised nature. There are thousands of people around the world known as miners who are responsible for confirming Bitcoin transactions by solving problems using computers with very high processing power. So, if one miner isn’t available, there are hundreds of thousands of other miners who can confirm your transaction in record time.
With this, a businessperson paying her European suppliers, or a parent who wants to send money to their child studying in China no longer has to worry about the conversion and transaction fees with Bitcoin or delay in sending. By simply buying Bitcoin in Zambia and sending to the desired destination, the recipient will receive the payment within minutes and also as easily convert the Bitcoin to the fiat currency where they are.
- Improved savings culture – the issue with the devaluation of currencies and inflations make saving unattractive for many as they do not know if their money would be available to them when they need it or if it would still be worth what it should. But with Bitcoin, users can easily create free Bitcoin wallets and keep their savings in it for years and have instant access to it when they need it.
- Alternate investment option – For many Bitcoin users around the world, Bitcoin is used as a store of value. This means that you can buy 1000kwacha worth of Bitcoin today, keep it for years. But because Bitcoin has a limited supply (only 21 million bitcoins can exist), the value of any bitcoin owned today is more likely to have appreciated significantly in the future.
Consider the fact that just a few years ago Bitcoin was worth just a few hundred dollars. Today, it is worth over $50,000 dollars. And as the adoption rate of Bitcoin increases globally, with institutions like Paypal, Mastercard, Visa, Square Inc., and notable banks like JP Morgan Chase and co. joining the cryptocurrency space, the value will yet appreciate. This positions Bitcoin as a good store of value for those seeking investment options.
- Availability – A good way to look at Bitcoin is as a global currency, not limited by social status or borderlines. Bitcoin is a currency for everybody that will likely be embraced by more countries and properly regulated to better serve its citizens. Bitcoin can easily be purchased by anyone at virtually any amount. Cryptocurrency exchanges like Yellow Card make buying and selling of Bitcoin easy for Zambians by making it easy for them to sign up, create a Bitcoin wallet and purchase as low as x kwacha worth of Bitcoin instantly.
For many apparent reasons, Bitcoin is here to simplify the lives of everyone and companies like Yellow Card whose mission is “financial freedom for all” are working to ensure that every citizen, including the unbanked and the underserved by prevailing financial systems have access to Bitcoin.
