Just 10 years ago, Bitcoin was another office joke in Africa. The rare few who took it seriously have made millions.
“One year and seven months ago. November 2015. That was the month I started with R3,500 ($260) and now it’s worth R37,000 ($2,800). A Bitcoin was $260. Exactly one year later that Bitcoin was $900. It grew over 300%. Today it’s $2,800.”
This was the moneymaking turning point for communications and marketing employee Shireen Ramjoo who, at the age of 32, was so taken by Bitcoin she left her job in the bank to start her own consultancy, Liquid Crypto-Money.
From humble worldwide beginnings Bitcoin, a digital currency, otherwise known as cryptocurrency, was born from blockchain technology – a mass linking of computers. The midwives are an estimated 5.8 million users generating a market value of $27 billion, which represents a level of value creation on the order of Silicon Valley success stories like Airbnb, according to the 2017 Global Cryptocurrency Benchmarking Study by the Cambridge Centre for Alternative Finance.
The impact of Bitcoin has been compared to the day paper money replaced gold and silver. It is so new that like there were no computer technicians before computers, there are few Bitcoin experts, more educated guessers.
Bitcoin is the tip of the iceberg when it comes to blockchain technology. Many financiers argue it will transform the world money system and maybe be the next dotcom-style boom in Africa. Up for grabs are billions more as peer-to-peer networks spark new business platforms and threaten to wash away established business practices that have been around for centuries.
“The first time I heard about Bitcoin, I had to write a press release for Standard Bank. It must have been early 2012. At the time I didn’t understand it, it just went over my head. I thought it was too technical. After I left the industry I wanted to be my own boss. I was looking for an opportunity and came across Bitcoin,” says Ramjoo.
She has made a business out of educating clients on Bitcoin, blockchain and cryptocurrency – topics that leave many baffled.
“We are in an evolution of money here. What people don’t realize is when the internet first started some governments were against it. As more countries started adopting it, more countries got involved. That’s the same phenomenon happening here,” says Ramjoo.
“We keep hearing of [blockchain] from a more technological point of view. Remember the topic of money is social… when you understand that this is actual money that you can use – I can go and buy bread and put petrol in my car – then you start wanting to find out more.”
Ramjoo’s venture is just one small example the business generated by the rise of this cryptocurrency. Since Bitcoin, more than 800 cryptocurrencies have blossomed in this unregulated market.
So what is blockchain and bitcoin?
When you transfer cash your money goes through the bank to another person. The bank, who acts as a central mediator, charges you a service fee and makes a record of the transaction.
Until recently, the bank was the only keeper of these records, which in turn is proof of your transaction. This is called the ledger system. The process of verifying the information takes days and also means banks are able to dictate the cost of these transactions.
Blockchain short-circuits the ledger system in the blink of an eye, by decentralizing it. In 2008, a paper published under the alias Satoshi Nakamoto suggested instead of your transaction being in one single computer server at the bank, you could store a transaction on thousands of computers around the world at the same time – rent-a-crowd worldwide.
“There are a whole lot of people logged onto this network and confirm all these transactions all day long. What do they get as a reward for it? The answer is Bitcoin. The reason why Bitcoin exists is to reward these people that make their computers available to store data and to become a world super computer that looks over transactions,” says Ran Neu-Ner, Johannesburg entrepreneur and Co-Founder of the Creative Counsel.
Not only does this mean there are literally millions of back-ups, so that you cannot delete the transaction should the bank be hacked, but also the bank is no longer needed to make the transaction. In effect blockchain cuts out the middleman making all the rules, all the money and protecting your privacy.
“The Bitcoin isn’t important. The piece of tech that’s important is the blockchain that gets tech around the world to become a super computer to transfer money to store contracts or whatever else,” says Neu-Ner.
Imagine a world where people go from place to place in driverless cars, where there are no stop streets, or traffic lights, and machines decide how fast you get to your destination. If you can dream it, Neu-Ner can see it.
“Think 10 years from now, when there are only driverless cars on the road. You don’t have to have anything on the roads created for human nature.”
“Imagine the scenario: we’re driving in driverless cars, we both need to get to work. Your car is in front of my car. You want to pass, so you would normally flash your car’s lights. But in a driverless car you’re not able to flash lights at each other and say move over.”
The solution will be for driverless cars to set up smart contracts and you’ll pay in [cryptocurrency].
“The guys who are working on driverless cars are working on that blockchain right-of-way system right now.”
“The keyword when you are thinking about the blockchain is decentralization… Just keep asking yourself, if something is centralized, how is it going to be disrupted? Because it’s going to be disrupted. It’s a new economy, where everyone who contributes earns their fair share in tokens,” says Neu-Ner.
Trading and spending
Because it is an international currency, the Bitcoin, as well as the world, is your oyster. You can travel the world by spending Bitcoin. In Japan, for instance, over 200,000 stores now accept Bitcoin.
This is how it works.
While on the way, a Bitcoin can be purchased on exchange sites when you are starting out. All you need to do is download an app, load up some cash and then start buying. Some financial brokers will even purchase Bitcoin fractions on your behalf.
The exchanges vary but we’ve found bitcoinzar.co.za offers a number of companies that will accept PayPal, your credit or debit card, and person-to-person. There is even a BTM (bitcoin ATM) at a business called Metroman in Kyalami, Johannesburg, that accepts rand in exchange for Bitcoin.
It is even possible to get your salary in Bitcoin; it’s as simple as a shopping cart on an online store.
There are, however, pitfalls. You must research the apps and look for realistic returns when investing in cryptocurrency, especially ones you are not familiar with. Schemes, such as Pipcoin, offered high returns of 35% a month and many fell for it.
“Millions were invested in it and many lost money, because they couldn’t tell it was a scam. It was plugged as the coin of Africa. So if you don’t understand how coins are generated, you won’t know how these schemes operate,” says Ramjoo.
Bitcoinzar.co.za also recommends you don’t leave your Bitcoin on an exchange. Hackers know that exchanges are mostly honey-pots, with private user information, and, more importantly, Bitcoin that can be instantly stolen and transferred away to an anonymous Bitcoin wallet.
“People are losing their money very quickly. They are believing that if they buy into this hype today, tomorrow I’ll come away with a lot of money,” says Neu-Ner.
If you are looking to invest, ensure you have a Bitcoin/cryptocurrency wallet where you can keep your data offline and private. You should always question the authenticity of these wallets and the company should be transparent.
It is even possible to mine you own Bitcoins, although this method of earning is considered to be going out of date. At the current rate of exchange, you would be spending more money on equipment and electricity, unless the price escalates substantially.
“You can compare it to when the internet first came and emails. The whole process of us writing a letter, going to the post office, then waiting for the letter to get to the person. When the email came, the postal service became a third party, and not being used as much as we used it before,” says Ramjoo.
Banks are transforming
Africa is looking at adopting blockchain-based currency. In February, the South African Reserve Bank said it is open to issuing a national digital currency, which would likely be based on blockchain or distributed ledger technology. Senegal is set to roll out its eCFA, a digital version of the West African franc, later this year, and there are even plans to extend distribution across the West African Economic and Monetary Union (UEMOA).
“There is going to be a new generation for banks. We are starting to see it play out in the market – governments starting to issue out their own cryptocurrency. Tunisia was the first country in the world to have its own government-issued digital currency… Some people are old school and will keep their money in the banks. But the bank of the future will not be the same as it is now,” says Ramjoo.
This is just the beginning of a new system that will transform the world and make billions in the process. Many people don’t understand what’s happening; those that do will likely become even richer.
Cryptocurrency, such as Bitcoin, is generated in the form of data strings. Only computers can solve the complex mathematical equations. For every completed equation, a coin is created and the coin that follows requires more data and processing power to add to the string, which in turn keeps a record of every transaction ever made.
“Bitcoin is not a company, nor does a single person or organization issue or control Bitcoins; therefore, it has no central point of failure. For this reason, nobody can inflate the currency supply and create hyperinflation crises, such as those that occurred in post-World War I Germany and more recently in Zimbabwe. In 2008, the government of Zimbabwe printed so much of its currency that in a single year, a loaf of bread increased from $1 to $100 billion. In both cases, any savings that people had in the form of national currency were completely destroyed.” – extracts from Bitcoin for the Befuddled by Conrad Barski and Chris Wilmer
A previous version of this story stated that there are two licensed exchanges in South Africa. This was incorrect and the article has been updated.