Bitcoin mining is the process where participants in the bitcoin network (called miners) contribute their computing power to verify and process transactions on the blockchain and are, in turn, rewarded in new bitcoins.
With fiat currencies, money is printed and distributed by a central bank. However, bitcoin does not have a central authority and new bitcoins are formed when miners solve complex algorithms making it a revolutionary way of issuing currency and incentivising people to help maintain the network.
Bitcoin mining has the potential to financially empower Africans as is evident from the story of Kenyan bitcoin miner, Eugene Mutai.
Kenyan Uses Bitcoin Mining to Improve his Financial Fortunes
Eugene Mutai’s journey offers a unique perspective on how bitcoin mining can be lucrative for Africans. If you were to walk into his apartment you would notice the phalanx of fans that are cooling his computers that are programmed to mine digital currencies each day without pause. He has relinquished a significant portion of his apartment for his cryptocurrency mining hardware. What makes Mutai’s case unusual is the fact that he is a high-school graduate with no formal training as a programmer or coder.
Even more interesting is until last year Eugene had not heard of bitcoin and cryptocurrencies. However, he was interested in technology and decided to borrow a friend’s Nokia Symbian S40, a non-smartphone that could download apps. During his free time away from agricultural labour and ferrying passengers on his motorcycle he taught himself the basics of HTML and CSS coding.
Unsatisfied with the meagre earnings from his odd jobs in the village and looking to improve the quality of his life, he decided to move to his uncle’s place in Nairobi. Fortunate for Mutai his uncle had a desktop computer and a Wi-Fi connection. The next four months would find him glued to the computer mastering the mysteries of code making his uncle concerned and at some point took away the computer.
Eventually, the learning paid off and he was able to land a job as a programmer. Soon he would become a tech consultant for a local startup incubator iHub and also work with the Nairobi County government. In the 2016 Git Awards, he was ranked as Kenya’s top software developer based on data from GitHub, a platform where coders store and share their work.
How can Bitcoin Mining be Rewarding for Africans?
Mutai’s mining runs six 1080 Ti graphics cards. The rig issues digital coins in the form of Zcash and LBRY credits. He plans to expand the mining operation by incorporating two more GPUs. However, for this to happen, he will need to upgrade the power supply to his apartment, which currently costs him $200 a month – far higher than that of average Nairobi households.
Bitcoin mining is essentially the process of adding transaction records onto the bitcoin blockchain. Bitcoin nodes serve to validate transactions and thus eliminate the possibility of double spending.
For an individual block to be considered valid it must have a proof of work. The proof of work is verified by participating bitcoin nodes each time a block is received. Bitcoin utilises the hashcash proof of work function. Mining allows the bitcoin nodes to reach a secure-tamper resistant consensus and new bitcoins into the system. Miners are rewarded by being paid any transaction fees and a ‘subsidy’ for newly issued bitcoins.
Cryptocurrency as a Wealth Distribution Vehicle
Presently, Mutai works for Andela which focuses on training coders and engineers in Africa and linking them with opportunities in businesses. While Mutai has made the leap from an underprivileged background to the middle class, his sights are now set on further wealth augmentation through cryptocurrencies, which he can trade for fiat currencies or hold as an investment.
For Mutai cryptocurrencies are able to give ordinary people like him a level playing field in the global markets. In a Bloomberg interview, Mutai stated,
“The entire ecosystem could be the biggest wealth-distribution system ever [….] big players can’t deny anyone from participating in the financial system.”
Mutai’s entry into cryptocurrency mining could not have come at a more opportune time. The market capitalisation of the cryptocurrency market has increased exponentially from $17 billion at the beginning of the year to about $190 billion currently. The value of bitcoin has also increased six times over this year and by the time of writing this article, was trading at $6,200. Bitcoin is especially attractive in jurisdictions where they are capital restrictions, inflation and low access to financial services. A prime example would be Zimbabwe where a cash shortage has driven bitcoin prices beyond the global average, to over $12,000 at the local exchange as people rush to protect their savings.
Mutai views digital currencies as the better alternative to local fiat currencies that are prone to political shocks, something to note in Kenya, where the country has had two elections in three months that have negatively impacted businesses, amidst controversy over who is the rightful leader. In addition to being a cryptocurrency miner, Mutai is also taking time to research on ICO projects that are promising as he continues to grow his investment portfolio.