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How ICOs Could Boost the Kenyan Startup Scene

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On March 17, 2017, BitSoko held the first ICO Summit in Kenya. The three-hour event attracted over 50 attendees and was well-received by the Kenyan startup scene as the main theme of the event was focused on how ICOs can help Kenyan startups to meet their funding needs.

In Africa, Nairobi – the capital of Kenya – has turned into a hotspot for startups, especially in the technology sector. The fact that blockchain technology is applicable in various sectors has made it possible for upcoming startups to find ways of utilising the technology for the solutions they seek to provide. This was evident on Saturday when six local startups pitched their solutions to attract investors and raise funds for their businesses through tokenisation.

Key speakers during the event included Michael Kimani from ChamaPesa, George Maina from Oseko & Ouma Advocates LLP, and Mr. Apollo who spoke at length on the advantages and risks that ICOs have in the cryptocurrency crowdfunding space in the country.

What is an ICO?

An initial coin offering, also known as an ICO, a token sale, a crowdsale or a token generation event, is a new form of funding that (predominantly) blockchain startups are using to raise capital for their venture. In an initial coin offering, a startup runs a crowdfunding campaign where it selling a newly-issued digital token in exchange for bitcoin (BTC) or ether (ETH). The future value of the digital token is then linked to the performance of the project. In that sense, an ICO or very similar to a stock IPO, except for the fact that the new digital token does normally not constitute a share in the company and its value is only indirectly linked to the success of the company.

While speaking on ICOs in Kenya, Chris from Coinweez compared an initial coin offering to table banking in Kenya that has been used over the years to fundraise for various projects including settling of school fees, weddings, and medical bills. While acknowledging that ICOs are a new concept that is quickly becoming mainstream he said,

“The ICO model can be modified to suit our needs in Kenya and Kenyan companies can have a smart way of raising money for their businesses.”

His sentiments were backed by Mic Kimani who felt that chamas in Kenya are “missing a technology to power what they are doing”. Kimani, who is part of the blockchain based app, ChamaPesa, said that the app is meant to give chamas a superior way for not only storing and earning but investing their money through the use of the blockchain.

He added, “ChamaPesa will connect different chamas to allow for borrowing of money as well as raising of money using ChamaCoin. The app will go beyond the Kenyan market and can be accessible by any agent network, which allows for borrowing of money hence having the ICO aspect. All chamas will be on the blockchain and anyone can be able to check the amount of money their chama has.”

Regulatory Framework and Risks in ICOs

For some people, the summit was a way for them to learn about what the regulatory framework for cryptocurrencies and ICOs looks like in Kenya. To answer this, George Maina from Oseko & Ouma Advocates LLP helped define what the regulatory landscape in Kenya is when it comes to digital currencies and ICOs.

Maina said: “As much as ICOs are not regulated in Kenya, it is not illegal to invest in bitcoin or any other digital currency and one can’t get arrested for it.” In the same breath, he added that bitcoin is not legal tender in Kenya. He also advised those seeking to invest in ICOs to do so at their own risk as there are currently “no laws on how disputes on the blockchain are solved.”

Apollo spoke about the risks that those investing in ICOs should be aware of. As there is no legal framework for ICOs currently in Kenya, one can raise money from anyone for their blockchain startup, terrorists included. At the same time, some startups do not divulge the amount of money they raise form the ICOs while others are just ideas that have no clear roadmap on the length of the project.

According to Apollo, more than 50 percent of companies that raised capital using the ICOs in the past one year were scams. Apollo also touched on the security issue relating to ICOs saying, “around 10 percent of startups seeking to raise funds through ICOs have been hacked and keys to where people can send them money changed simply because the companies seeking to crowdfund focused on getting money and forget about security.”

He advised those considering investing in ICOs to have “a high risk of tolerance as there is a chance that one could lose all their investment.” He went on to say that there is no insurance when it comes to investing in ICOs and it is important for people to do due diligence and ensure the startups they are investing in are legitimate.

“I hope that we get to a place where everyone can be able to raise money using ICOs,” he concluded.

Upcoming Startups Using ICOs to Crowdfund

The event also several Kenyan startups pitch their solutions in order to raise money for their startups through tokenisation, which refers to the digitising of business assets. Some of the startups that pitched include HAIL-A-HUSTLE, an e-commerce platform that seeks to develop business potential through its diverse products, and Usafi Sanitation, a startup that wants to improve sanitation and improve human dignity by providing schools and communities with proper sanitation by installing eco-friendly toilets and eliminating pit latrines. Other startups included Nairobi Cloakroom, Farm Books, and Mazingira Safi.

ICOs present an interesting and exciting way for startups and other established companies in Kenya and Africa at large to raise money to either start or expand their businesses. As the ICO market continues to grow, it is only a matter of time until more African startups will jump on this new opportunity to receive funding, which is often hard to come for local startups on the continent.

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The Sun Exchange Launches SUNEX Token to Fund its Solar Project Insurance Fund

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The Sun Exchange, a South Africa-based blockchain startup, has announced the launch of its new SUNEX network token. The SUNEX token will be used to create a solar project insurance fund for emerging markets on The Sun Exchange platform.

The SUNEX network token will be utilised on the new Sun Exchange Solar Project Insurance Fund (SPIF) which has been built to unlock financing and minimise risk for financially underserved solar projects.

The Sun Exchange is a blockchain-based solution that provides members with a unique opportunity to earn income by investing in clean solar energy projects across Africa. Those looking to invest in the solar panels are able to purchase each solar photovoltaic (PV) cell online at $10 and lease them for installation to schools, businesses, hospitals as well as other organisations in Africa and the Middle East.

Individuals who invest in the solar cells are able to earn monthly income from the lease of the solar cells that are either paid in cryptocurrency or fiat currency with the consumers benefitting from access to clean energy that is affordable.

The new SUNEX digital network token and SPIF are the latest additions to the innovation designs that The Sun Exchange is developing to maximise benefits for its stakeholders while eliminating the obstacles hindering the financing of solar energy installations in developing countries.

SUNEX Digital Token Features

As an ERC20 standard token that has been built on the Ethereum blockchain and is designed to make solar asset ownership more affordable and rewarding, the SUNEX token’s features include:

  • Opportunities to receive up to a 20 percent return in tokens by staking SUNEX tokens into the Sun Exchange SPIF
  • Access to discounts and lease bonuses when using The Sun Exchange
  • Priority access to new solar projects on the platform
  • A gamified rewards programme, which guides users towards maximising the diversification and social impact of their solar cell portfolio

One of the main concerns for The Sun Exchange is to provide its members with a secure financial environment. For this reason, all the solar projects they have launched to date have proven reliable due to their rigorous approach to due diligence.

“The new Sun Exchange SPIF creates a new layer of security and reliability as the company grows, stimulating investment in impactful solar projects,” stated Larry Temlock, co-founder and CFO in a company press release, and will be “the world’s first crowd-sourced default insurance fund for clean energy projects in emerging markets.”

The Sun Exchange’s SPIF will:

  • Safeguard The Sun Exchange solar cell owners against costs associated with potential solar project defaults
  • Unlock the flow of capital into emerging markets Commercial & Industrial (C&I) solar projects, accelerating critical economic and social development
  • Allow The Sun Exchange members can grow their token holdings by staking SUNEX tokens into the SPIF

Solar Projects Financing a Drive for Economic Development

Speaking on the new SUNEX digital token and SPIF, Abraham Cambridge, founder and CEO of The Sun Exchange said: “Small commercial and industrial solar projects can drive urgent economic development by powering organisations such as hospitals, schools, small and medium businesses in developing regions. However, with aid organisations and NGOs primarily funding residential solar, and large banks and financiers only backing large and utility-scale projects, C&I solar projects fall into a major funding gap. With the new SUNEX network token and SPIF, Sun Exchange is leveraging blockchain and the crypto-economy to further bridge that funding gap and address a very real global challenge with the power to impact the lives of millions.”

David Orban, the founder and Managing Partner of Network Society Ventures, and one of the investors in The Sun Exchange’s projects said: “We have invested in The Sun Exchange and purchased SUNEX tokens, because we believe in the fundamental value of the business, and in the healthy growth of the network as people all over the world embrace renewable energy. The innovation of coupling blockchain with solar energy decentralizes renewable energy funding and production, democratizing access and setting the stage for the long-term growth of Sun Exchange’s activities.”

To date, The Sun Exchange has provided financing for four different solar projects across South Africa that are fully operational. These include two wildlife rescue and protection parks, a school and a tire recycling factory. In addition, The Sun Exchange’s crowdsale for its fifth project that is meant to provide power for an environmental NGO South South North sold out in a record-breaking two weeks.

“What is fantastic about The Sun Exchange model is that it benefits us as the recipient of power and it benefits the people buying the solar cells and it’s also a win for the environment,” said the Director of South South North, Carl Wesslink. “Their unprecedented approach to solar financing can achieve installation at scale on a commercially sustainable basis. This is the catalyst required for realising our (distributed) energy revolution.”

The SUNEX network token will be available for sale through a public token event from April 22, 2018, at 12:00 PM UCT to both existing Sun Exchange members as well as the general public. The Sun Exchange SPIF will then be created shortly after the token sale comes to an end. Additional information on the new SUNEX token, token sale and SPIF can be found on the SUNEX Network Token Whitepaper.

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First-Ever Bitcoin Cash Kenya Community Meetup Will be Held on April 14

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On April 14, 2018, at 2 pm, the first-ever Bitcoin Cash Kenya Community Meetup will take place at Pepino’s Pizza on Kimathi Street in Nairobi.

Djibril Wachiye, event organiser and founder of JumpstartUP, told BitcoinAfrica.io: “The launch of Bitcoin Cash (BCH) Kenya community is informed by our mission to help Bitcoin Cash BCH) serve one billion users around the world within five years, Kenya included. We hope to provide economic freedom to users by allowing them to send money to anyone, anywhere at any time for less than a cent.”

“Other secondary innovative products and services built on top of Bitcoin Cash have made it easier for ordinary people to start using Bitcoin Cash as money. For instance, CoinText enables users to send Bitcoin Cash to any phone without internet via SMS, making it possible for the poorest in the developing world to participate in the digital economy, services on Local Bitcoin Cash matches peer-to-peer bitcoin cash buyers and sellers, allows people to post or apply for gigs and pay or get paid in Bitcoin Cash, and Tipprbot allows social media users to reward content creators with Bitcoin Cash directly on their usernames without the complexities of wallets,” he continued.

“With high levels of unemployment in Kenya, we believe that creating awareness of Bitcoin Cash (BCH) and innovative solutions around it will lead to the technical and economic empowerment of the masses,” Wachiye added.

“Information symmetry has contributed to the loss of funds to pyramid schemes disguised as bitcoin investment opportunities. By default, it is the responsibility of the enlightened to educate the masses and create stronger communities to lay a foundation for the mainstream adoption of digital currencies.”

“We are at a crucial moment in the discourse around Bitcoin scaling, and now more than ever everyone needs to pay attention and contribute to this discussion. On this premise, Bitcoin Cash Kenya community aims to bring everybody on board through monthly meetups and activities to discuss issues around Bitcoin Cash, help each other solve day-to-day issues in their specific areas of specialisation and network,” Wachiye concluded.

Bitcoin Cash (BCH) was created in August 2017 as a result of the ongoing Bitcoin scaling debate as an alternative peer-to-peer cash payment system to Bitcoin (BTC).

If you want to attend the first-ever Bitcoin Cash Community Meetup in Kenya, you can register here.

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What are Stablecoins?

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By definition, a currency should meet the following criteria; be a medium of exchange, a unit of account and a store of value. While decentralised digital currencies have served as an excellent speculative asset, the same cannot be said for their use as a medium of exchange, store of value or unit of account. For the case of dominant cryptocurrencies like bitcoin and ether, it makes little sense trying to store value in a currency whose price fluctuates by 10 to 20 percent on a regular basis. In such a scenario a solution would be the use of stablecoins.

Understanding Stablecoins

Across the globe, there are very few places that have a stable currency. Even popular fiat currencies such as the euro or US dollar are not immune to fluctuating exchange rates, inflation, and diminishing purchasing power. Still, the fluctuations are usually so small that people prefer using these government-backed currencies. However, in the case of cryptocurrencies, these fluctuations are more significant resulting in higher volatility. The volatility makes them attractive to investors who are looking for speculative digital assets, but quite less effective as spending currencies.

For many, the picture of an ideal cryptocurrency is one that is balanced in its purchasing power or is slightly inflationary, to motivate the owners to spend their coins rather than holding them. This ideal cryptocurrency would achieve the following properties of a currency, namely, be used for transactions and payments, act as an asset or store of wealth and used as a unit of account. This perfectly engineered cryptocurrency is also known as a stablecoin.

In simple terms, stablecoins are price-stable cryptocurrencies that have their value pegged to another asset such as the US dollar.

Benefits of Stablecoins

Popular cryptocurrencies like bitcoin (BTC) and ether (ETH) attract a lot of retail and institutional money due to their volatile prices. While such volatility may fuel speculation, it hinders real-world adoption of applications built on top of these digital currency protocols.

For instance, it would be unfair to pay someone a salary in bitcoin when you know the purchasing power of their wages keeps fluctuating. The same applies to entrepreneurs and consumers who find their exposure to price fluctuations when transacting in cryptocurrencies to be risky. In regards to applications built on a blockchain, any application that requires low volatility cannot be denominated in an underlying currency that fluctuates by almost 20 percent in a day. Furthermore, significant changes in the value of a cryptocurrency also preclude consumer loans on the blockchain, prediction markets, derivatives and long-term smart contracts that require price stability.

Not everyone in the cryptocurrency community is keen on speculation. Some prefer a store of value on an immutable distributed ledger, bypassing financial intermediaries and inflationary fiat currencies. Currently, mainstream cryptocurrencies cannot adequately provide that. Instead, the momentum is shifting towards achieving price-stability in cryptocurrencies through the creation of stablecoins.

How Can Price Stability be Achieved?

The classification of stablecoins includes three major types: fiat-collateralised coins, crypto-collateralised coins, and non-collateralised coins.

Fiat-collateralised Stablecoins

In this case, a certain amount of traditional currency is deposited as a collateral and coins are issued in the ratio of one-to-one against this fiat currency. The coins can also be pegged to other items such as gold, silver, or oil just to name a few. This is by far the simplest way to build a stablecoin. However, it requires a central authority to guarantee the issuance and redeemability of the stablecoin. Also, to ensure the stablecoin is fully collateralised regular audits have to be performed.

Crypto-collateralised Stablecoins

These stablecoins are almost similar to their fiat counterparts, the only difference being the collateral is not a real-world asset but is instead another cryptocurrency. Many will argue that the drawback to this is cryptocurrencies are unstable, which means the collateral will fluctuate. That is why these type of stablecoins are over-collateralised so as to absorb price fluctuations.

For example, someone deposits $300 in ETH to receive stablecoins worth $100. This means even if the price of ETH depreciates by 20 percent, the stablecoin can still retain its price as there are still $240 in cryptocurrency collateral backing the value of the stablecoin. The obvious flaws for crypto-collateralised coins are their more prone to price instability than fiat-collateralised coins. In addition, they can also be spontaneously destroyed due to their over-collateralisation, which has a high loss exposure in the case of a cryptocurrency market crash.

Non-collateralised Stablecoins

These are not actually backed by anything except for the hope they will retain a certain value. The system builds on smart contracts that algorithmically increase and decrease the supply of the price stable cryptocurrency.

Stablecoins in the Market

While there are several stablecoin projects in various phases of development today, a few have gained some level of notoriety.

One such project is MakerDAO. MakerDAO is a decentralised autonomous platform on the Ethereum blockchain whose token Dai is pegged against the value of the US dollar. Price stability is maintained through an autonomous system of smart contracts.

Another project is TrueUSD, which is a US dollar-backed stablecoin that is 100 percent collateralised. TrueUSD’s legal framework allows users to exchange USD directly with an escrow account. Their public and audited smart contracts ensure a 1:1 flat rate for TrueUSD and USD in the accounts.

Alternatively, Basecoin can be considered as a non-collateralised stablecoin since they rely on consensus to decrease and increase the supply of their coin. Still, their price is pegged at $1.

So far we are yet to witness a stablecoin go mainstream. Part of the problem is no team has managed to develop a universally accepted stablecoin without having to compromise on features such as decentralisation, privacy or security. The reality is lack of price stability is holding back cryptocurrencies from displacing most forms of fiat currency and promoting decentralised applications. The successful implementation of a stablecoin could just be the catalyst that opens the door for further innovation in the crypto-ecosystem.

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