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by Christopher Tozzi, Jun 15, 2017

Is Africa the Next Hub for Blockchain Development?


South Africa

Compared to Western nations, many areas of Africa lack extensive infrastructure, entrenched financial institutions, a high degree of political stability and/or large pools of capital. In most traditional senses, these challenges constrain opportunities for growth on the continent.

Yet in many respects, they also create opportunities for the growth of blockchain technology. By design, blockchain frameworks thrive in environments characterized by many of the challenges that Africa and its residents face today.

For this reason, blockchain technology is in a remarkable position to transform African societies and economies. The process is already underway as blockchain adoption grows within Africa, despite challenges like the difficulty of retaining African blockchain developers.

Africa’s Challenges, Blockchain Solutions

In several key ways, blockchain technology offers meaningful solutions to some of Africa’s most pervasive social, political and economic problems.

Consider the following challenges that many African nations face and the ways in which blockchain technology can help solve them: 

  • Instability of central authorities: Unlike traditional currencies, blockchain-based cryptocurrencies do not depend on governments or the credit of the state in order to guarantee their value. They are also immune to localized inflation triggered by political crisis or war. These factors make cryptocurrencies like bitcoin particularly attractive within African countries that suffer from recurring political upheaval or military conflict.
  • Lack of infrastructure: The exchange of data or property on the blockchain typically requires nothing more than an internet connection. A lack of highways, airports and other types of traditional infrastructure does not impact the efficacy of a blockchain.
  • Lack of capital: Investment capital — whether for governments, businesses or individuals — is limited in Africa, due to a high dependence on non-Africans as a source of capital and a relatively small financial services industry on the continent. About 80 percent of sub-Saharan Africans are unbanked. Blockchain can solve this challenge by providing a means of exchanging capital without relying on traditional banks. Plus, because blockchains are not administered by complex bureaucracies, they can provide fast and cost-efficient access to capital, whether it is a microloan for an individual or a large government bond.
  • Limited educational opportunities: Acquiring the specialized expertise necessary to work with many types of modern technology can be difficult in many parts of Africa. But because most blockchain technologies, such as Bitcoin and Ethereum, are open-source and fully documented on the internet, it is easy for anyone, in any part of the world, to learn how they work and develop business strategies based on them. In other words, access to information about blockchain technology is not a privilege reserved for people living in countries with strong educational systems in the same way that professions like engineering or medicine sometimes can be.

Blockchain in Africa Today

The application of blockchains as solutions to challenges within Africa is not just theoretical. A number of companies are already using blockchain technology to offer innovative solutions for people on the continent. While they work to solve Africa’s problems, they are taking blockchains in directions that could one day help people all over the world.

BitHub.Africa is one example. Founded in December of 2015 and based in Kenya, BitHub.Africa offers consulting, development and support services to organizations working with blockchain technology on the continent. The initiative aims to promote blockchain use in a range of areas, from financial services to identity management.

Bitland, a blockchain company based in Ghana, has a more specific focus. It is building a blockchain-based land management system, which will allow people to register property ownership via a blockchain, eliminating the need for reliable political authorities to guarantee property rights and confirm transactions.

In the realm of financial transactions, the South African company Bankymoon is working to leverage Bitcoin and other blockchain-based cryptocurrencies to enable securities trading and electronic payments. The company is especially interested in using blockchain to extend financial services to populations whose access to traditional banks is limited.

African blockchain developers are innovating in the area of education, too. Development group otlw, which was founded in Nairobi, is using smart contracts and blockchains to build solutions for assessment of educational content and to drive group learning.

The Challenge of “Brain Drain”

Although otlw was originally based in Africa, its team members are now spread between North America and Dubai. Their exodus from the continent is representative of a broader brain-drain challenge that Africa faces, as some of its talented, native blockchain developers move away to work in areas where blockchain technology is more established.

In order for innovative companies like the ones described above to succeed in Africa, a critical mass of African blockchain experts needs to remain on the continent and education around blockchain technology needs to increase.

Fortunately for these companies, some African blockchain developers have affirmed their commitment to do so, partially out of a principled commitment to improving their homeland through blockchain applications.

And while the specter of brain drain is likely to remain a challenge for Africa as blockchain solutions mature on the continent, the momentum that African blockchain companies have already established in a wide range of niches suggests that the technology is on the path to innovative advancement in Africa, where it promises to help overcome significant roadblocks that the people there have long faced.

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