Six reasons why we must popularize bitcoins in Kenya
Before I outline the reasons why you, Nakummat, OLX, Safaricom and everyone else need to embrace bitcoins in Kenya, let me first address a lie I saw in an online article published on July 12th 2013 titled One Third of Kenyans Now Have a Bitcoin Wallet. Crap.
I know there is a general consensus among statisticians and those interested in stats that any stats can be taken as truth as long as counter stats is lacking – but you can’t just throw stats at us and expect us to buy the data even if it defies rational computation and logic. Do one third of Kenyans really have a bitcoin wallet? And they did so by July 2013?
First, Kenya’s population is being estimated to stand slightly above 44 million. A third of that figure is 14.5 million people. According to data released by Communications Authority of Kenya (CA), by March 2014, there were slightly over 21 million Kenyans with access to the Internet from 13.3 million subscriptions. What Daniel Stuckey (the writer of the article claiming that one third of Kenyans have a bitcoin wallet) wants you to believe is that Kenyans with bitcoin wallets are more in number than total Internet subscribers in the country – I am not sure if he confused M-PESA with a bitcoin wallet as the article is largely about M-PESA. A more realistic assumption is that by August 2014 there were about ten thousand Kenyans with a bitcoin wallet, extrapolating from the number of Kenyans that had downloaded the Bitcoin App for bitcoin mining.
Another stats that needs to be questioned is the report by Standard Bank that says 83% of Kenyans are living below a dollar a day. I refuse to buy that – more than 36 million Kenyans cannot be destitute paupers! According to calculations a friend and I did, on average one needs to spend more than $1.2 dollars a day to live a generally poor life in Kenya – and it requires only 8 million Kenyans to have in income of slightly more than Shs 16,000 a month to ensure that all Kenyans lived at $1.2 day.
Back to bitcoins – you are aware of bitcoins, right? If not, click and read the article- Bitcoins: the digital currency simplified. To summarize, a bitcoin is money that doesn’t exist as paper, copper or silver or even as gold but as digital data stored in an agreed digital format mostly in the user’s bitcoin wallet. Think of a bitcoin wallet as a folder in which you save your bitcoins, but you must download the folder or use an online based one (hence it is an app or account like an email account). In addition to this, bitcoin also differs from the physical currencies in that there is no government or institution that owns it. There is no central bank that regulates its value or controls its inflation/deflation – the value of bitcoin is left entirely to the control pure demand/supply curve.
Bitcoin has all the characteristics of money and these include divisibility (it is the only currency that can be divided into units of up to a satoshi or 0.00000001 BTC), scarcity (currently there are slightly over 13 million bitcoins and the upper cut is 21 million that will ever be mined), durability (bitcoin is the most durable of all the currencies), mobility (a bitcoin can travel from one part of the globe to the next in nanoseconds), and most importantly bitcoins cannot be counterfeited. And just as ordinary money, bitcoins can be stolen or lost.
You can own Bitcoins in either of the two ways, to either mine in up (a kin to going to the mine field and dig your own gold) or buy it – similar to buying dollars or any other currency that you currently don’t have.
To mine bitcoins, you will need to install a bitcoin mining software that will enable you to join the over 5 million bitcoin miners globally. What the mining software does is make your PC or phone become one of the other over 5 million PCs that verify bitcoin transactions; and add the transactions to the blockchain. For simplicity purposes, a blockchain is a public ledger or record system that stores all bitcoin transactions with their respective addresses. If for example I send you a bitcoin today from my wallet, that transaction will have a unique address that originates from my wallet for sending that bitcoin, and the entire peer-peer network that operates Bitcoin system must verify that that particular address has not been used before, and once verified, added to the ledger or blockchain for future verification purposes. The more your PC become engaged in the tedious verification process, the more it is likely to be rewarded with a bitcoin.
The second method is to buy the bitcoins. You will need to have a wallet, either through an online bitcoin wallet service like the one provided by www.coinbase.com or download one to your PC or phone. Once you have a wallet, the wallet will give you a unique 27 to 34 random characters address (you might think of it as similar to an email address) – the address of which will be useful in conducting bitcoin transactions e.g. receiving a bitcoin from someone you have bought from. To now buy bitcoins, you may need to join the bitcoin market place e.g. www.localbitcoins.com that is similar to a stock market like NSE, and identify a seller, arrange with the seller to sell bitcoins to you, and pay him up. You can also buy bitcoins from the numerous online exchange bureaus.
Renowned stores and businesses have legitimized bitcoins
As a currency bitcoin is currently being used to buy goods and services in a number of stores across Europe and the US. In the technology world, Dell has joined the league of those trading in bitcoins, or rather accepting bitcoins as money for its merchandise, and explained why it is accepting bitcoins as follows:
Why is Dell accepting bitcoin?
Bitcoin is a new payment option intended to offer even more flexibility for customers. Bitcoin payments can be made easily from anywhere in the world, and offer reduced payment processing costs.
WordPress, the world’s leading blogging platform that powers about 17% of all blogs globally accepts bitcoins as payment for its services. This is what WordPress says of its acceptance of bitcoins in the support center:
Bitcoin is an alternative to PayPal and credit cards as a form of payment in the WordPress.com Store
Amazon.com, the second largest online retain store in the world, is accepting bitcoins too. Forbes.com published an article back in February this year guiding users on how to use bitcoins to buy merchandise from Amazon.com and other stores, though later there were reports that the leading e-commerce portal was not considering bitcoins on its site. However, when revelations came out that Amazon.com had filed a patent that mentioned bitcoin as an acceptable form of payment then later acquired a bitcoin accepting Twitch TV, it became acceptable to consider Amazom.com as accepting bitcoins as a form of payment.
eBay, the world’s leading consumer-consumer website (or online market place) that has run its business in an auction style, is said to be seriously considering to accept bitcoins as a mode of payment.
From this site and this other site, you will be able to see a list of leading stores both physical and online that are currently accepting bitcoins as a method of payment. Big names in those lists include Overstock.com that prides itself for helping consumers discover designer brands and home goods at the lowest prices online, Cumbria and Nicosia Universities that accept bitcoins for tuition fees, Expedia, the world’s largest online Tour and Travel booking portoal, among many many more.
The six reasons why we must popularize bitcoins in Kenya
1. Bitcoin is the most suitable mode of payment, after cash, that can sort the trust issues Kenyans have with online shopping
A few days ago I wrote the article – Is Fargoshopping the e-commerce game changer in Kenya? I shared the article on my Facebook as I normally do and received this comment:
Trust issues has literally stagnated the e-commerce industry.
In August 2012, Kachwanya wrote a piece on E-Commerce Industry In Kenya- The Missing Link and one of the issues identified in that article that needed to be dealt with is the trust issue. OLX, being the leading online classifieds site in Kenya, has been forced to deal with trust issues by among other things advising the buyers and sellers to beware of possible fraudsters online.
From the buyer’s perspective you simply do not send money until the services/goods bought have been delivered. But from the seller’s perspective, how do you deal with the possibility of chargeback? Chargeback means the buyer recalls the payment by e.g. claiming that the payment was made to the wrong person. If the payment was made through M-PESA, for instance, the buyer can call M-PESA customer care, claim that he just made a wrong transference, and M-PESA will be able to reverse the transaction if the recipient hasn’t withdrawn it yet. This is the main reason most businesses in town do not accept payment through M-PESA.
This is where bitcoin works just like cash. If you intend to use bitcoins as a buyer, you need to know that once you have sent bitcoin to the seller from your wallet, there is no way you can receive that bitcoin back. You must always counter-check that you are sending to the correct address and that the amount being sent is the correct amount.
Then to enhance confidence in Kenya’s e-commerce landscape, the online markets like OLX and Fargo Shopping can adopt the Escrow and Dispute Resolution Systems as are being implemented by LocalBitcoins.com. The escrow system is whereby once the seller, let me call him Bob, has agreed to sell bitcoin to someone I will call Alice, LocalBitcoins.com deducts the amount to be sent to Alice from Bob’s wallet and holds that amount in Escrow Service. The amount is held until Bob confirms that he has received whatever it is he was to get from Alice, then the bitcoins are released to Alice. The dispute resolution on the other hand involves LocalBitcon.com’s support team and the user community.
OLX type of platforms can integrate the Escrow Service (possible with Bitcoins) where if a buyer buys for a product on sale in their site, then the value of the product is deducted from the buyer’s wallet, held by OLX, the seller is told by OLX that the buyer has actually paid, the seller delivers the product on sale, then the money is released by OLX to the seller’s wallet. Thinking of it, I am sure even payment via Lipa na M-PESA can have a similar control system.
Then those who operate as Jumia.co.ke really don’t have much to worry about as they normally accept payment upon delivery.
2. Future Currency
There are several speculators that have seen that the future is digital currency. Foremost, digital currency will save our trees and let our minerals like copper, silver and gold be used in other areas where they are needed. Secondly, as the world become more and more technologically and specifically smart-Internet oriented, the more the society needs to embrace digital (hence cashless) modes of payment. As much as payment platforms like Credit/Debit cards and mobile money promise the word a possible cashless society, it is only bitcoins that guarantees this future and at the same time retaining the anonymity associated with cash.
3. Bitcoins are as good as cash
People prefer cash because it doesn’t really leave identity of the person who makes payment to the seller. If you pay via mobile money, credit card or via bank transfer, your identity including your names, possible address, email, or phone number is also sent to the recipient of the payment. If you however pay in cash, most probably the best thing the recipient shall have known about you is your face. Bitcoin guarantees this anonymity and even removes the face from being known.
4. It is easy to enhance online shoppping with bitcoins
If many Kenyans embrace bitcoins, it will become easy for the online stores and even offline ones like Nakumatt to come on board and accept bitcoins as a mode of payment. As more and more transactions are done using bitcoins, then more and more services will become available online and the society will generally move forward technologically.
5. Globalization of payment
As many Kenyans store up bitcoins, merchants will follow suite and embrace bitcoins in Kenya. As I mentioned up there in the stats, once more than 10K peopel embrace bitcoins in Kenya, the story will receive local coverage by the mainstream media and the stores, service providers and all other sellers will start embracing the currency. The adoption of bitcoins in a developing country like Kenya will encourage other neighboring countries in Africa to adopt the currency…the news of which will encourage the developed world even adopt the currency in an accelerating rate…and before you know it, bitcoins will be the sole currency that shall remove the dollar from the global trade. See Can M-PESA help eliminate the dominace of the dollar in global trade?
6. Bitcoins will deal with corruption once and for all
There are two properties inherent in the bitcoin system that will help eliminate corruption in a global scale. Actually one reason why bitcoin was conceived was the economic meltdown that happened in US and Europe in 2007/2008 largely due to corruption in Wall Street. The two properties that make Bitcoin a suitable system to tackle corruption are the storage of all transaction in a public ledger called blockchain that can be verified at any time by anyone from anywhere and the triple accounting principle for recording every transaction made. I will explore these two properties in a future article – stay tuned.