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Africa is Undergoing a Crypto Renaissance – Here’s Why

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Africa’s crypto adoption is growing at an unstoppable rate, and several recent studies point to the continent’s transformation into one of the largest cryptocurrency hubs in the past years.

For example, the 2020 Geography of Cryptocurrency Report conducted by Chainalysis revealed that Africa’s cryptocurrency sector is now one of the top 10 in the world, growing from 67% to 78%. Kenya and Nigeria stood out as the countries with the highest crypto usage. This is consistent with the findings of a Yahoo Finance report, which found that Nigeria was the country that used cryptocurrencies the most. According to the report, 32% of Nigerians have used or owned at least one cryptocurrency in 2020 – that’s much more than some countries in Europe and the Americas.

Another report,  The State of Crypto in Africaconducted by Arcane Research, revealed that Africa is one of the most promising continents for crypto, despite recession concerns and lack of banking infrastructure.

So, what factors have favoured Africa’s rise to power, and what threats will it have to overcome to secure its position as the world’s top crypto economy? 

Africa’s rise to power as a Fintech hub

Africa’s skyrocketing crypto adoption is inextricably linked to the continent’s booming Fintech sector. Favoured by foreign investments, growing mobile usage, and the completion of the African Continental Free Trade Agreement (AfCFTA), Fintech is maturing in Africa. As more and more countries are embracing digital transformation, VC funding is on the rise.

Despite predictions from the World Economic Forum that the economies of African countries will shrink considerably in 2021, reports show that VC funding for African Fintech startups has grown by 51%. South Africa attracted the most investments, followed by Nigeria, Kenya, and Egypt. More and more people are interacting with digital finance services in all their forms.  The popularity of crypto Forex brokers is on the rise, consumers now rely on apps and web services to save money, trade stocks, and manage their portfolio, and online loans are emerging as a simpler alternative to bank loans.

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Remittances from diaspora

Remittances from the diaspora are another important factor behind Africa’s rise as a cryptocurrency power.  According to the World Bank, remittances to Africa continue to be an essential source of income, despite the drops caused by the pandemic. In 2019, sub-Saharan countries reached $48 billion in 2019, and nearly half of this amount was sent to Nigeria. The average expat sends around 6.8% of their income to their home country.

Meanwhile, for African expats, this rate is at 8.9%. What does this have to do with crypto? Well, most people who send money home don’t do this using traditional means because bank transfer rates are prohibitively expensive. Africa is currently the most expensive country to save money to, with transfer fees going as high as 8.3%. Instead, they choose cryptocurrency transfers (bitcoin being the most popular cryptocurrency), which are instant and have no transfer fees.

According to Reuters data, there were over 601,000 cryptocurrency transfers in June 2020, accounting for approximately $316.1 million. However, the actual size of remittances is believed to be much higher than official reports.

Rising inflation rate

While Africa has a Fintech environment that favours innovation and attracts foreign investment, crypto adoption wouldn’t have been the same without the rising inflation rate. Last year, most African economies were hit hard by the recession. As a result, inflation has skyrocketed, and many national currencies, which were already plummeting before the pandemic), continued to devalue.

For example, South Sudan had a whopping 102% inflation rate between 2016 and 2017. In 2020, the Nigerian Naira suffered a 24% devaluation. As the fate of national currencies remained uncertain, cryptocurrency rapidly became a tempting alternative. Despite the sceptics’ lack of trust in crypto, Bitcoin did not crash because of the pandemic. In fact, it even peaked at $64,000 in April, convincing many that crypto really is here to stay. Other cryptocurrencies, like Ethereum, Stellar, and Binance Coin, have also had a favourable evolution.

Lack of banking infrastructure

Numerous times, Africa has been dubbed “the unbanked continent” due to its lack of banking infrastructure. In 2014, 66% of African consumers did not have a bank account. While this percentage has increased in the past few years, African banks continue to rely on traditional, outdated methods, and their services remain unreachable for people with low income.

There is also a general distrust for banks, which pushed people to choose Mobile Network Operators instead, which are a type of alternative financial services providers. Crypto transfers work in a similar way to MNOs, which convinced many Africans to give them a try.

Potential challenges

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Long-term prospects for Africa’s crypto ecosystem are generally positive. However, in order for this technology to reach its full potential, several challenges need to be addressed first.

Lack of high-speed Internet

High-speed Internet is essential for cryptocurrency transfers. However, Africa currently lacks a stable infrastructure. In 2019, Africa had the slowest data speeds, which proved quite problematic when the pandemic hit, and remote work and online learning became essential. Internet access and broadband speed greatly differ from country to country. While speeds are higher in Eastern and Southern Africa, people in West and Central Africa often have to learn and work at speeds of 0.16 Kbps. Due to the lack of competition, Internet prices are higher too.

Low financial literacy

Unfortunately, despite the rising crypto adoption, Africa still has one of the lowest financial literacy rates in the world. According to the Global Financial Literacy Survey conducted by Standard & Poor’s, financial literacy is inconsistent. Botswana ranks the highest, with 52%, but most African countries have low financial literacy (Angola 15%, Nigeria 26%, Sudan 21%, Ethiopia 32%). This will need to be addressed in order for people to use cryptocurrency safely.

Lack of regulation

Although cryptocurrency adoption seems to be unstoppable, most African countries don’t regulate it, which could lead to financial scams. Even experienced investors could be at risk here, so people with low financial literacy who don’t understand exactly how blockchain works could be even more vulnerable.

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Ethereum Timeline: Shift to Proof of Stake

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Shift to Proof of Stake

The much-anticipated transition of the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS) consensus is finally taking place. The adaptation of PoS has always been the plan and a vital part of scaling Ethereum by future upgrades. However, abruptly shifting to PoS can pose significant technical and community challenges that are not as simple as using PoW to achieve network consensus. Having said that, what exactly are PoS and PoW?

Proof of Work

Proof-of-work (PoW) is a consensus algorithm that allows for the secure, decentralised verification of transactions on a blockchain. In a PoW system, miners are responsible for verifying and committing transactions to the blockchain. During the verification process, miners compete against each other to solve complex cryptographic puzzles. The first miner to solve the puzzle is rewarded with cryptocurrency, and the transaction is added to the blockchain.

Reasons To Shift From Proof of Work

The Ethereum ecosystem has evolved at an astounding rate in the last year. This growth was primarily due to a significant emergence and explosion of NFTs and Decentralised Finance (DeFi) initiatives. While the change-over was imminent, some factors to be considered for the same are:

  • The PoW consensus protocol requires users to utilise significant computational power to validate transactions and add new blocks to the network.
  • Users who devote their computational resources to the shared ledger are miners.
  • These miners are rewarded with Ether tokens in exchange for the computing power they have supplied to the network.
  • With PoW consensus, Ethereum takes up to 113 terawatt-hours of electricity in a year. According to Digiconomist, it is more than the total electricity consumption of the Netherlands per year.
  • The current Ethereum transaction with PoW consensus takes up energy equivalent to the consumption of one week of energy of an average US household.

With so many downsides to its cap, PoW has many advantages, which is one of the main reasons it has been a reliable consensus for so long. The PoW consensus has been robust and secure all these years. But the consensus can be utilised by a cryptocurrency with a massive valuation and relatively simple use case, such as the bitcoin. With the amount of energy and power involved, it becomes difficult for individuals to meddle with a high valuation asset.

Proof of Stake

The consensus protocol Proof-of-stake (PoS) has been introduced to address the issue of over-mining. Proof of stake (PoS) is critical to understand because it could eventually replace the proof of work (PoW) consensus mechanism that is currently used by most cryptocurrencies.

“PoS is a way to achieve decentralised consensus without using energy-intensive mining. It is an alternative to the more common proof of work algorithm. With PoS, a cryptocurrency’s blockchain is secured by its token holders who are required to lock up their tokens as stake and not by miners equipped with powerful hardware. It’s an energy-efficient, cost-effective and therefore, a popular choice for crypto giants like Ethereum,” states Dev Sharma, CEO of Blockwiz, a crypto marketing agency.

In contrast to PoW, in which the individual who completes the mathematical proof first is rewarded with new coins, with PoS, no new coins are created.

Benefits of Proof of Stake Consensus

Proof-of-stake introduces several enhancements over the PoS mechanism:

  • Improved resource proficiency – you don’t need as many energy mining blocks.
  • Minimal entry barriers, lower hardware requirements – Even if you don’t possess top-tier hardware, you still get ample opportunities to participate in the creation of blocks.
  • More excellent resistance to centralization – PoS would imminently facilitate the generation of more nodes.
  • Staking facilitates the operation of a node. It does not necessitate significant expenditure on equipment purchases or resources, and if you lack the ETH token to stake, you cannot participate in staking pools.
  • Staking consensus enables reliable sharding. Shards enable Ethereum to generate new blocks simultaneously, leading to enhanced throughput of transactions.
  • In a PoW mechanism, sharding the chain would reduce the amount of energy required to modify a particular network section.

In a Nutshell

Proof of stake (PoS) is a type of algorithm used by cryptocurrencies to determine who gets to create new blocks on the blockchain. PoS works by requiring users to lock up some of their currency in a smart contract called a stake. In return, they are given the right to validate blocks on the network and earn rewards.

The advantage of PoS is that it doesn’t require the massive energy consumption that PoW does. This non-dependency on massive energy utilisation makes it more environmentally friendly. It reduces the risk of centralisation since few users would be able to control the majority of the currency. Therefore, it’s no wonder that Ethereum is making the much-anticipated switch.

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Amber Group March Recap 2022: Here’s What Happened

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Amber Group NewsNamed one of CB Insights’ 2022 Blockchain 50, an annual ranking of the most promising blockchain and crypto companies in the world.

Announced the appointment of Ehsan Haque as the General Counsel for Europe, Middle East, and Africa (EMEA)  region.

CEO Michael Wu was selected as a recipient of the “Top 100 CEOs in Innovation Award 2022” by Word Biz Magazine.

Product Development and Partnerships

Amber Group Partnerships

Participated in Mina Foundation’s token sale, EthSign’s seed round, and Zecrey protocol’s angel round.

In the News

Michael Wu CEO Awards

World Biz Magazine: Michael Wu, CEO of Amber Group – interview WBM Top 100 Innovation CEO.

CNBC: For crypto to be adopted globally, we will have to comply with regulators: Crypto-trading platform.

Bloomberg: Bankers Who Stay in Hong Kong Are Rewarded With a Pay Bonanza.

Economist: EthSign raises $12 million in stable coin led by Sequoia Capital India, Mirana Ventures.

Forkast News: From crisis currency to consumer adoption: What next for crypto?

CoinDesk: Mina foundation raises $92M to accelerate adoption of Zero-Knowledge Proofs.

Cointelegraph: If the glass slipper doesn’t fit, smash it: Unraveling the myth of gender equality in crypto.

AMBCrypto: Amber Group strengthens management team with Ehsan Haque as EMEA General Counsel.

CoinCu: Zecrey protocol has raised $4M in an angel fundraising round.

Chain Debrief: Is the user experience in DeFi bad? Opportunities, challenges and how to see growth in DeFi.

Medium: Reproducing the $APE airdrop flash loan arbitrage/exploit.

Medium: Non-fungible trends.

Events and Media Appearances

Michael Wu

CEO Michael Wu joined Forkast News to discuss crypto’s consumer adoption and what’s next for crypto.

CEO Michael Wu joined CNBC Street Signs Asia to share how Amber Group seeks a balance between regulation and crypto development.

CEO Michael Wu gave an interview with Economist Impact at Technology for Change Week on how to stay ahead of the curve in the fintech space.

Managing Partner Annabelle Huang joined Economist Impact’s Asia Trade Week to discuss the future of crypto as payment in Asia.

Managing Partner Annabelle Huang joined Avalanche Summit to discuss the opportunities and challenges in DeFi.

Managing Partner Annabelle Huang joined Goldman Sach’s panel discussion on “Digital assets – Investing in the future” to celebrate International Women’s Day.

Annabelle Huang

Managing Partner Annabelle Huang gave a guest lecture on DeFi and Web3 for the International Finance class at Singapore Management University.

Managing Partner Annabelle Huang joined the DIG FIN VOX podcast to talk about Amber Group’s move to Singapore and into retail.

CSO Dimitrios Kavvathas joined Blockchain Africa Conference 2022 to discuss institutional investment in crypto.

CSO Dimitrios Kavvathas joined FinTech Festival India at a panel discussion on “De-Fi – A better solution for peer-to-peer lending”.

CSO Dimitrios Kavvathas joined the World Blockchain Summit in Dubai at a panel discussion on “Fostering the global crypto ecosystem”.

Dimitrios Kavvathas

Europe Managing Director Sophia Shluger delivered a keynote speech on digital wealth at Blockchain Africa Conference 2022.

Europe Managing Director Sophia Shluger joined the CryptoCompare Summit in London to discuss the building blocks of the new digital economy.

Europe Managing Director Sophia Shluger joined the FundFocus Europe 2022 conference to discuss the foundation for the widespread institutional adoption of cryptocurrency.

Sophia ShlugerRear

Latin America Managing Director Nicole Pabello joined the Ethereum Rio conference to discuss the LATAM Ecosystem in the world.

Nicole Pabello

Institutional Sales Director Justin d’Anethan joined EmergentX’s Annual Digital Asset Summit to discuss the institutionalizing of the digital asset industry.

Justin d'Anethan

Managing Director Ben Radclyffe joined Credit Suisse’s Asian Investment Conference to discuss the spillovers between crypto and equity markets.

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Launch of the Hydra Developer Bootcamp

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Hydra Bootcamp

The Hydra Developer Bootcamp organised by ChainIDE and Conflux for Web3 developers in Africa provides them with hands-on blockchain 101 training, insight into the African blockchain & crypto industry, and a unique outlook on the future prospects of the Metaverse and Web 3. More than 200 people have already signed up for this event while the first two modules have already attracted more than 500 views in two days.

On Saturday 2nd April 2022, the opening ceremony of the 2022 Hydra Developer Bootcamp was successfully held. Wu Xiao, CEO of WhiteMatrix, a Chinese tech firm that provides industry-leading blockchain services, was the first guest speaker at the opening ceremony and said,  “we strive to support the blockchain ecosystem and grow together with the community”.

Chris, head of global expansions at Conflux Network, advocates for the transition towards Web3 and the mass adoption of blockchain technology. Topics such as DeFi, GameFi, and the phenomenon of Africa boasting the biggest volume of Bitcoin remittance in the world are to be discussed in the future.

On launch day, the co-founder of GIGx, Osamede Arhunmwunde described the adoption of blockchain technology as the opportunity of our generation. The goal of GIGX as Africa’s first decentralised marketplace is to onboard the next million users across Nigeria.

Other guests include Chimezie Chuta: founder of Blockchain Nigeria User Group (BNUG), Conflux Network was also represented by Ehis Omozusi, their regional marketing & business lead. Other valuable guests include Obasi Francis: CEO & Co-founder of Cassava Network & former CEO at Lead Wallet and Gaius Chibueze: CEO of ABiT Network.

During the panel discussion, Mr. Chuta depicts the lack of trust and transparency as the main bottlenecks to Africa’s development, and that blockchain’s nature (transparent, immutable, verifiable, secure & decentralised) could be the key to solving this problem. On the other hand, Mr. Ehis emphasised the enormous growth potential of the African crypto sector and that this line of work is not limited to developers. During his intervention, Mr. Francis stressed that the crypto space in Africa boasts an excellent development environment as it is already self-regulating.

The Hydra Developer Bootcamp comes with a $7000 Bounty, and POAPs are available for those who attend the bootcamp from Week 2 to Week 4. Participants that attended the entire bootcamp event will get a chance to join the giveaway lottery scheduled on Week 4. The registration deadline for the Hydra Developer Bootcamp is 9th April at 13:00 GMT+1.

Future modules in this Hydra Developer Bootcamp include creating smart contracts using Solidity, and developing a blockchain-based game and metaverse. Team building has started and participants may contact other members in the Telegram group or outside the TG group to build a Team. Coding lectures will start next week and instructions will be given on how to build applications and deploy them on the Conflux blockchain. Make sure to follow the Hydra Developer Bootcamp on Official channels and remember filling in the forms in the Telegram group!

Official Website:

https://labs.confluxnetwork.org/

Event Registration:

https://docs.google.com/forms/d/e/1FAIpQLScx-OzoePNhf4-w7uo6SAEPT_Ckw9JH7VccyuIq_9askqWF9w/viewform

Latest Bootcamp info:

https://t.me/ChainIDEAfrica

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