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Suppressed By World Superpowers, Ethiopia Should Turn To Bitcoin

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As the U.S. removes Ethiopia from a critical trade program, it’s clear that the African nation should focus on finding sovereign value.

The United States’ recent decision to remove Ethiopia from the African Growth And Opportunity Act (AGOA) trade program is a significant and intentional blow to the Ethiopian people and economy.

The country exported around $3 billion worth of product in 2019 — removal from AGOA will cut out approximately half of Ethiopia’s exports to the U.S., which has been the country’s largest export market. According to a recent article in Foreign Policy, this removal will force over 200,000 people, 80% of whom are young women, to lose their jobs. Those most affected by this particular move made by the U.S. are the Ethiopian people, not the Ethiopian Government.

And the reason this is being done to Ethiopia is no secret — it is also no secret to Ethiopians why they were allowed to be a part of AGOA in the first place.

The message of many in Ethiopia to the U.S. regarding this removal has been consistent: It is still not too late to stop what you are doing and start supporting a democratically-elected government. You can reverse the AGOA sanction on Ethiopia and save thousands of people their jobs and life security. This decision also damages Ethiopia’s export market significantly, which will hurt the overall population. America can still support Ethiopia and earn back the trust of the Ethiopian people. We still believe America is capable of standing for its founding values. If this continues, however, it’s clear that America will lose the hearts of Ethiopians to other super power influences.

As Senator James Inhofe of Oklahoma from the Republican Party said: Other superpowers are already in Ethiopia, clearly ready to come off as more virtuous and supportive than the U.S. As of now, we still want to believe that it’s not the U.S. as a whole that wants to divide us, but rather a small arm of the current administration which is working hard to lose its longtime friend.

Nothing says “Black Lives Matter” like enforcing the unwanted will of the U.S. onto Africans through unsympathetic and harsh foreign policy on an already impoverished continent.

Ethiopia Should Convert Energy Directly Into Sovereign Money

For Ethiopia, the only solution is to live outside of the centralized economic system of the world. If, instead of choosing between which foreign superpower should influence us, we want real sovereignty, we will need real, non-fiat, internationally-respected, hard money that we can produce entirely on our own. Freedom and sovereignty isn’t possible when all of the items we seek are audited by the centralized SWIFT system for days before they are allowed or denied.

Our developmental aspirations and wants are controlled by others who say “yes” or “no” based on how it benefits them. We need money we can move when we want to, money we can use to do what we want. We need the most secure, decentralized and incredible achievement of mankind that no superpower can tamper with. We need Bitcoin now more than ever.

Ethiopia Can Make Billions From Mining Bitcoin With Local Resources

Ethiopia doesn’t have much that it can sell without the approval of the superpower nations. The only thing that can be sold without anyone’s approval is energy — not to a nation, but to a network. The Bitcoin network pays energy providers (“miners”) with bitcoin and Ethiopia has enough installed generation capacity to make $4 billion to $6 billion per year, just in the short term — making the damages done by AGOA sanctions seem insignificant.

Ethiopia also has about 60,000 megawatts of untapped potential energy capacity, and with only 6,000 megawatts, Project Mano has projected that bitcoin mining would yield $2 billion to $3 billion annually at $25,000 BTC prices, or more like $4.5 billion to $5 billion at today’s BTC prices. Over 4,500 megawatts of power capacity has been built to support the AGOA-based companies that are leaving. That energy could immediately be used to generate even more money than it was generating while being used by the AGOA manufacturing companies. Ethiopia flagship project, GERD, can generate 6,000 megawatts by itself and remains remote, making it very expensive for internal or external use, but perfect for Bitcoin mining.

Alex Gladstein has written the following about how Bitcoin mining can help developing nations accelerate their growth, while simultaneously increasing their foreign currency and energy access:

“Billions of people in developing nations face the stranded power problem. In order for their economies to grow, they have to expand their electrical infrastructure, a capital-intensive and complex undertaking. But when they … build power plants to try and capture renewable energy in remote places, that power often has nowhere to go…

Here is where bitcoin could be an incentives game-changer. New power plants, no matter how remote, can generate immediate revenue, even with no transmission lines, by directing their energy to the Bitcoin network and turning sunlight, water or wind into money…

With bitcoin, any excess energy can be directed to mining until the communities around the plant catch up.” 

This is what Ethiopia should be doing to counter the AGOA sanctions: Provide power to the Bitcoin network to generate billions of dollars to use for its own aspirations, with un-sanctionable money that can be converted to any country’s currency at any time without anyone’s approval.

All Ethiopia needs to do to generate billions of dollars is to use its already-installed generation capacity. But that’s not where its potential ends. The 60,000 megawatts of potential energy that the country has is obviously not easy to realize. If Ethiopia invites Bitcoiners around the world to help us realize our energy potential, the kindest souls will come help set up power infrastructure that the population can use, while also helping to convert the excess energy into money that is fully sovereign.

All Ethiopia has to do is open its arms and express its energy aspirations. The nuances of these agreements will matter greatly, but if planned well, all Ethiopians will benefit.

Any power source, no matter how remote, can be used to mine bitcoin. The more energy we realize, the more we will develop our economy, the faster we close our trade deficits — the more bitcoin we will mine, the more energy we will realize, the more our economy grows. And this will all be a repeating cycle.

We sincerely ask the Ethiopian government to seriously look into mining Bitcoin to solve our most challenging problems and say “no more!” to the foreign interference into our culture and economy.

This is a guest post by Project Mano. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The Roads To Hyperbitcoinization: Describing The ‘Transition Agents’ Bringing Us Financial Freedom

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These bottom-up “transition agents,” from private business to the freedom ladder, will be what drives us all to hyperbitcoinization.

This article is the second part in a series where we outline the views and predictions made by the Bitcoin community concerning the prospect of hyperbitcoinization. In our analysis, we highlight “transition agents”: main players, groups of players or institutions that could accelerate the transition to a Bitcoin world. For each topic, we base our arguments on the references collected, and if possible, present data that aims to assess the probability of this outcome.

The first article described top-down scenarios initiated by institutional agents or governments whose influence is expected to trickle down to a wider audience. We identified monetary inflation and the rollout of central bank digital currencies (CBDCs) as probable scenarios initiated by central banks, while bitcoin hoarding, a rise in cross-border payments in bitcoin, bitcoin as a legal tender and even the advent of a hash war were identified as scenarios likely to induce government acceptance of Bitcoin. In view of the recent pronouncement by El Salvador, it appears that political agendas in South America are in a state of flux, in particular in countries with national elections scheduled for 2021 and 2022.

This second article aims at understanding of bottom-up type initiatives carried out by businesses, communities and individuals.

Bottom-Up Scenarios

We identified several notable hyperbitcoinization scenarios that emanate from two large groups of actors. The first group represents private-sphere-led initiatives brought together by established firms and startups. The second group is composed of grassroots initiatives mostly impulsed by the Bitcoin community whose main purpose is to educate and help new users to be onboarded. The article begins with a discussion of the initiatives driven by these two groups before turning to an examination of emerging individual behaviors. In this article, we have followed the principle of methodological individualism, well-known in the Austrian school of economics, which consists in explaining large-scale social phenomena based on subjective individual actions and motivations.

Private Sphere

Figure one depicts scenarios initiated by private actors that could — intentionally or unintentionally — set off a chain of events driving to hyperbitcoinization.

Figure one: Chain of events driven by private actors.

Business Adoption

Since inception, Bitcoin has demonstrated that it offers a wide variety of benefits to users. Its value proposition as a safe haven for individuals is without question one of its key enduring narratives. In August 2019, the world was surprised when MicroStrategy (MSTR), a NASDAQ-listed public technology company, announced that it was converting part of its cash reserves into bitcoin. Figure two depicts publicly-traded companies that reported owning bitcoin on their balance sheets or have converted a fraction of their cash reserves to bitcoin over time.

Figure two: Mapping of U.S.-based public companies owning bitcoin (Q2 2021). Source: cryptotreasuries.org.

To date, we can divide this trend into four distinct areas:

  • Quadrant I is composed of early-adopter companies that have held bitcoin for several years. It includes Bitcoin mining companies (GLXY, MARA, RIOT) that, historically, have bet on the long-term appreciation of the asset. As they grow, these companies will naturally move into Quadrant II.
  • Quadrant II is territory personified by MicroStrategy, which has suddenly converted a large part of its reserves denominated in USD into bitcoin and keeps on purchasing more bitcoin recurrently. The company value seems to be strongly correlated with its bitcoin holdings (60%).
  • Quadrant III contains the innovators: companies like Tesla and Square (now Block) that have converted a relatively small fraction of their reserves into bitcoin and may increase their exposure in future.
  • Quadrant IV is probably not reachable for most companies. It would imply large companies with valuation exceeding $100 billion getting more than 50% of their reserve in bitcoin. If it happens, the amount of capital allocated into bitcoin will approximate trillions of dollars.

Since the MicroStrategy announcement, many other companies have started to display an interest in Bitcoin, and we can expect to see more of these kinds of initiatives appearing over the coming months once decision-makers have weighed their choices.

If hyperbitcoinization comes to fruition, the revenues, costs, profits and valuations of all companies could be accounted for in bitcoin (Mimesis Capital and Burnett), and most valuable companies would be the ones holding the largest chunks of bitcoin on their balance sheet.

Private Coin

When Meta (formerly Facebook) announced in 2019 that it would be launching a new digital currency, Diem (originally called “Libra”), the move caught governments and financial institutions alike off-guard. Diem’s stable value was to be derived from a basket of fiat currencies (U.S. dollar, euro, Japanese yen, British pound and Singaporean dollar) that would allow any Facebook user to send money as easily and intuitively as sending a message.

Although an appealing idea in many ways, concerns were raised in some quarters about trusting a company that feeds on user data. Some feared Diem would embody the worst of monies and data privacy practices. On the other hand, the launch of a private digital currency like diem may serve to familiarize large numbers of users with this emerging technology and thereby act as an on-ramp to broader Bitcoin adoption. As users get acquainted with digital currencies, they will develop an understanding of bitcoin as a scarce, censorship-resistant and decentralized digital money.

10x Factor

Bitcoin is often considered a better form of money because it combines significant improvements in terms of portability, divisibility or fungibility when compared to both past and present forms of monies, along with bringing radical disruption in terms of resistance to censorship and fixed supply. One aspect that remains underexplored is transaction costs on the economy.

Over the centuries, people have cooperated to minimize transaction costs and produce more efficiently what they are unable to produce individually. The theory of the firm by Ronald Coase describes the relationship between internal and external costs. 

Figure three: Impact of transaction costs on dynamics of growth. Source: Wikipedia.

When a firm’s external transaction costs are higher than its internal transaction costs, the company will grow. If the external transaction costs are lower than the internal transaction costs the company will downsize by outsourcing, for example.

Applying this theory to the banking sector, we can project that the Bitcoin protocol is likely to capture a significant portion of the banking industry value proposition, and it is not hard to imagine that it could probably capture it entirely once the Bitcoin stack becomes a more tangible reality (see figure three). Over time, we can expect the value created on top of the Bitcoin stack to first capture the value of the financial industry, and then surpass it.

If the transaction costs incurred by Bitcoin users are lower than transactions enabled by conventional payments rails, demand will shift to the cheaper channel. Following Brexit, Visa and Mastercard increased their interchange fees by almost 1%, squeezing merchants’ bottom lines even further. This has also occurred in Colombia, where merchants stopped using debit and credit cards to avoid the excessive fees.

Elsewhere, merchants who want to reduce interchange and swipe fees, may also consider other payment options such as the Lightning Network as a means of reducing costs. Payment service providers risk entering a death spiral initiated by a shrinking customer base placing pressure on profit margins and ultimately rendering their services less competitive. In the context of increasing compliance costs in the banking and payment industries, the likelihood of this scenario cannot be ignored.

Transaction costs represent just one of several key aspects in the battle between established companies and Bitcoin-native services. In terms of remittances, in a recent research article, Bitrefill found that convenience and speed were as important — if not more so — than cost for some customer segments. Looking at the sophisticated process of sending remittances in Nigeria, they determined that the entire process would be reduced to 20 to 30 minutes from the several days it typically takes to send conventional cash-based remittances. Even if 30 minutes sounds like a long and painful experience in today’s financial world, it represents a ten-fold gain compared to cash-based remittances.

Even if we could argue that Bitcoin doesn’t exhibit yet the same number of transactions as large payment service providers, the payment infrastructure has grown at a rapid pace to the point of surpassing PayPal in terms of volume of transactions in 2021 and to present a viable alternative to existing payment rails (see figure four).

Figure four: Volumes of transactions. Source: blockdata.tech.

This adoption is illustrated by the increasing number of Bitcoin transactions observed in Nigeria. According to Bernard Parah, CEO of Bitnob, the transaction volume observed in Nigeria is driven primarily by businesses and commerce. Domestic controls on capital imposed by the Nigerian government considerably limit the capacities of individuals and companies to trade internationally. Lacking access to U.S. dollars, a mechanical company wanting to buy spare parts from China, for example, would not be able to find a seller because no one would accept the naira as a form of payment. The use of Bitcoin — either directly or through a third party who can pay a prospective seller in yuan — creates a credible alternative means of payment that thereby opens access to the global marketplace for our Nigerian mechanical company.

These ten-fold factor examples highlight the role of transaction costs, but this is not to downplay how ecosystem startups also need to pay attention to transaction reliability and to the overall user experience, especially concerning self-custody services that differentiate from custodial services and their onboarding processes dictated by regulation and compliance.

Broader Public Attention

Long seen as the ultimate safe haven in the crypto world, bitcoin is still finding its way as a medium of exchange.

While, in theory, whales and original gangsters (OGs) have had enough time to accumulate significant portions of bitcoin, the purchasing capacity of newcomers is limited by current price. The accumulation of satoshis is therefore the only option for those wishing to become familiar with this new asset class. Programmed regular purchases such as dollar-cost averaging (DCA) or loyalty programs offering cashbacks in satoshis are two options for earning bitcoin that are gaining in popularity.

The progressive integration of Bitcoin services into social networking and e-commerce platforms — or even games for which frequent microtransactions are familiar experience — could have the potential to onboard a large, digitally-savvy customer base in a short period of time.

Figure five: User base of top social media firms, e-commerce sites and games. Source: Statista, Alibaba, EBay, Wikipedia, estimates.

Big tech companies already offer services to several hundred million or even billions of people worldwide (figure five). If any of these companies were to start accepting bitcoin as a means of payment, this would immediately trigger interest in the technology from a population that had little to no prior exposure to cryptocurrencies. Twitter’s announcement that it had developed a Lightning Network tipping function that would help people send money frictionlessly is illustrative of how large social media firms might leverage the reach of their networks.

E-commerce companies could also play a major role in spreading Bitcoin use. As Tim Draper pointed out, consumers have already been buying products indirectly with cryptocurrencies for years with the purchase of vouchers and gift cards redeemable on e-commerce platforms representing the largest number of payments (figure six).

Figure six: BitPay payment count by industry. Source: BitPay.com

A Rakuten case offers an analogy of how fast a large e-commerce actor can scale up a new payment technology through its user base. By allowing customers to pay by credit card, and gradually capturing payments made outside of their own platforms, over time Rakuten has become one of the largest credit card issuers in Japan.

Financial World

Over the last decade, Bitcoiners have regularly hypothesized how events initiated within the financial industry might accelerate the visibility of Bitcoin, such as the introduction of exchange-traded funds (ETFs) in the United States, or how the creation of clearer regulations might attract trillions of dollars from institutional investors. Even though more sophisticated financial products will likely assist in the wider adoption of Bitcoin and increase prices, actions taken by financial actors have not been particularly associated with the prospect of hyperbitcoinization.

However, El Salvador President Nayib Bukele’s announcement to issue a Bitcoin bond, at the end of Bitcoin week in El Salvador, once again caught many observers by surprise. The Bitcoin bond — also called the Volcano bond — is a $1 billion tokenized bond that will be used to finance the construction of the first Bitcoin city and infrastructure in the Central American country. The Bitcoin bond offers several disruptions in comparison with traditional bond markets:

  • The Bitcoin bond has the power to circumvent several layers of intermediaries, thereby allowing El Salvador to reduce its capital costs and interest payments thanks to low, 6.5% coupons.
  • Out of $1 billion, $500 million will go into infrastructure and $500 million will be invested in buying bitcoin.
  • The first version of the bond will be available in the first quarter or 2022 on Bitfinex under the EBB1 ticker symbol, and if successful, we can expect other bonds to follow.

The long-term reverberations for El Salvador are promising. Not only does this initiative provide for the construction of the geothermal energy infrastructure needed to power an entire new city, but it could also create a surplus of green energy that could be exported to neighboring countries. Most importantly, the Bitcoin strategy designed by the El Salvadoran government could attract the kind of global investment and knowledge workers that would help establish long-term prosperity in the region. By showing the rest of the world its openness to business and capital influx, El Salvador could replicate the success of the Asian Tigers in the 1960s.

The Bitcoin Community

The growth of the Bitcoin network is based in a strong community committed to the idea of a P2P electronic cash system. Orphaned since the disappearance of its creator Satoshi Nakamoto, the Bitcoin ecosystem continues to play a major role in spreading his ideas. By supporting technological developments and their diffusion, the Bitcoin community undergirds the process of technological familiarization within the public and private spheres addressed in this series of articles.

This motley international community of enthusiasts nicknamed “cyber hornets” encompasses miners, node holders, investors, speculators, analysts, entrepreneurs, journalists, influencers, OSS contributors and developers who devote considerable time and energy to educate new users and contribute, defend and support Bitcoin.

The actors described in the following section are representative of this community of cyber hornets, and contribute to the global dissemination of Bitcoin technologies.

Influencers

Influencers represent a group of thinkers, investors and entrepreneurs who have significant media coverage and habitually voice their opinions on Bitcoin. Bitcoin detractors regularly criticize the technology on both social and traditional media to discredit influencers. Others, like Michael Saylor and Jack Dorsey, who understood the impact Bitcoin will have on their companies, frequently praise its invention and are joined in their praise by global business leaders. It may be difficult to quantify the long-term effects that influencers have on uptake of Bitcoin technologies, but debates around these new technologies help normalize them in the eyes and ears of the wider public.

In the short term, however, this kind of promotion may also negatively impact public perceptions, as we saw in the wake of Elon Musk’s inconsistent social media messaging. Following a series of tweets where the tech entrepreneur targeted the energy consumption patterns of proof of work, the price of the asset experienced strong variations (figure five).

Figure five: BTC/USD price evolution and Elon Musk’s tweets. Source: Vox.com.

NGU Technology Fans

“Number go up” or “NGU,” is by far one of the most influential explanatory factors in Bitcoin adoption. In this scenario, newcomers drive the price of bitcoin up, while the increasing asset price attracts a new wave of investors, HODLers and the curious. As shown in figure six, continuous price increases from inception onwards produces “fear of missing out,” (FOMO) that is, a fear of not being included in something that others are experiencing.

Figure six: Number of crypto wallet app downloads. Source: statista.com.

“NGU technology” acts as an efficient, clear and self-sustaining marketing message. In figure six, the evolution of the number of crypto wallet app downloads coincides with the 2018 and 2020 bull markets and there is no reason to believe this relationship will change in future.

Most hyperbitcoinization scenarios are based on the mass adoption of Bitcoin by several types of players — individuals, businesses, cities and eventually countries — in a sequential way, with this mass adoption ultimately driving up the price of bitcoin.

The NGU technology narrative is supported by several price models based either on fixed production, in the case of “S2F” and “Lengthening Cycles And Diminishing Returns,” or based on energy consumption, in the case of “Bitcoin Energy Value.” Alternatively, actors such as Mimesis Capital propose an approach that consists of evaluating the asset price relative to the possible total market share that could be captured as shown in the M2 money and global wealth examples (figure seven).

Figure seven: Bitcoin parity. Source: www.pricedinbitcoin21.com/parity (Mimesis Capital)

All of these models may have an effect on public perception by suggesting a future price increase and by reinforcing the message of NGU technology.

Anonymous Educators

Since the early years of Bitcoin, individuals initiating friends and family into the cryptocurrency world have been a key part of Bitcoin culture. Word of mouth led people to discover this open, decentralized, borderless and censorship-resistant currency. Over time, personal accounts have continued to grow as more structured initiatives have appeared alongside to evangelize those with inquiring minds.

The Bitcoin Beach community in El Salvador is one of the more prominent examples of this process. Although the community remained under the radar for some time, it was instrumental in El Salvador’s decision to adopt bitcoin as legal tender, thereby positioning the country at the forefront of financial innovation.

Inspired by Bitcoin Beach, other initiatives have tried to replicate its enthusiasm in other communities. In Senegal, Bitcoin Developers Academy is aiming to train university students in the development of Bitcoin and Lightning Network applications by adapting the content and values of other Bitcoiners.

The notion of adaptation is crucial. The Bitcoin narrative is shaped by individuals imbued with predominantly Western values and for whom notions of individual freedom, privacy and self-sovereignty resonate. In many societies, money is seen as a mechanism for strengthening social relations within the group. In order to onboard new segments of the populations of Africa or Latin America, it is vital that the Bitcoin narrative be adapted to resonate with locals. Narratives centered around Bitcoin as a tool of individual freedom or means of privacy protection have done little to inspire imaginations in Eastern Africa. Instead, newcomers have grafted an alternative set of values onto Bitcoin that connect with the sense of community belonging encapsulated by the concept of Ubuntu, which is often translated as, “I am because we are.”

If new users embrace the technology, their expectations will differ from those held by earlier adopters, and in response, the Bitcoin narrative, functionality and services will necessarily evolve. By introducing multisig shared custody in its Bitcoin beach wallet, Galoy gives another example of a necessary adjustment of the narrative in Central America, describing it as:

“…a multi signature solution where the keys for the funds in cold storage are held by established members of the local community. This model reduces reliance on centralized companies outside of the community while also reducing friction of onboarding members to the network.”

Adaptation of functions and educational content conveyed by Bitcoin in response to uptake in new cultural contexts will be a source of significant innovation and enrichment for the community as a whole.

Perspectives

Bitcoin As A Feedback Loop

Learning about Bitcoin is often a personal, intrinsically-motivated journey that encourages inquiry into a range of subjects as varied as the monetary system, technology, economy and philosophy. In this sense, Bitcoin plays the role of a virtual tutor who cultivates a thirst for knowledge in its followers. Once convinced of the superiority of Bitcoin over alternative currencies, individuals develop behaviors that reflect the nature of this invention.

The limited supply of Bitcoin has encouraged hoarding behaviors from several types of actors. Prior to 2016, bitcoin traded below $1,000 and therefore acquiring multiple coins was considered an attainable goal for many people in the developed world.

Fast forward to 2021, when the price of bitcoin has appreciated considerably, such that it has become onerous for newcomers to acquire an entire bitcoin. The result is that newcomers are incentivized to buy smaller fractions of bitcoin. The accumulation of satoshis or “stacking sats” is the most concrete example of this practice that has pushed an entire generation of newcomers to acquire bitcoin in a programmatic and methodical way, as demonstrated by the success of companies proposing DCA services or cashback rewards.

One of the consequences of newcomers’ propensity to maximize the share of bitcoin in their asset portfolios — and hence, savings — is that if enough newcomers share this strategy, their cumulative efforts could propel the price of bitcoin significantly higher and eventually kick-off hyperbitcoinization.

For each new daily expense, Bitcoiners are faced with a choice of whether or not to spend. By spending, they deprive themselves of the possibility of buying more Bitcoins, while if they refrain from spending the money saved can be converted into satoshis. This behavior clearly indicates a preference for future reward over immediate superficial spending. In this way, Bitcoin has transformed people from consumers into savers and can be seen as a reference of value anchored in the mind of consumers in a way that supports prudence.

Source: @BitcoinIsSaving

By privileging the essential over the superficial, the durable over the fragile, and the fruitful over the futile, Bitcoin stands poised to help our society respond to the economic, environmental and social crises we are facing. For the first time, the introduction of a currency whose existence is linked directly to a conversion of energy will allow us to systematically integrate energy not only into our currency, but into our economic model.

This sends a strong signal given that Bitcoin is a social movement under expansion. By being the first to incorporate energy into the economic system, Bitcoin could act as a feedback loop that puts an end to the superficial consumerist models permitted and sustained by fiat monetary systems.

Shot For Prosperity

Large-scale Bitcoin adoption may seem like a remote possibility for some, but it has nevertheless become a full-fledged financial tool for an eclectic crowd. The West tends to view the countries from the global South as lagging in terms of the latest technological innovations, but following a series of interviews, the authors of this article have come to believe that where Bitcoin is concerned, the level of technological sophistication surpasses that found in many developed countries.

 In the table above, case one depicts how Bitcoin adoption by low-income families resolves challenges that may be difficult for Western readers to understand. Yusuf Nessary, co-founder of the Built With Bitcoin Foundation, recalls that such families — at times isolated from major urban centers — must travel long distances to receive cash-based remittances sent by family members. Traveling to the nearest town not only incurs significant expense, but it also means forgoing a day’s wages for families who live day to day. The introduction of digital payment directly to a cell phone can dramatically improve users’ lives by eliminating the costs of traveling to the nearest bank or ATM.

Cases two and three depict scenarios where individuals and businesses have embraced Bitcoin as a payment method in order to sell their products or services more smoothly and connect to the global economy (#paymeinbitcoin). In an interview with these authors, Bitcoin developer Fodé Diop anticipated that if the digital workforce in Senegal starts selling their services to foreign companies, capital injected into the country will reap benefits not only at the individual level, but also country-wide.

This analysis was shared by Nigerian Bitnob CEO Bernard Parah, who considers that bringing a viable payment solution in Nigeria would solve 50% of the problem and could ultimately help flatten the world, as he said in his own interview with these authors. Diop likewise predicts that Bitcoin could disrupt or even put an end to the brain drain that has impacted emerging economies.

Figure eight: Age pyramid of Africa and Europe. Source: https://population.un.org.

In contrast to Europe’s aging society, the populations of African countries are largely composed of youth under 25 years of age and display dynamic demographic growth (figure eight). If these young people continue to face high rates of unemployment and poor future prospects, the social and economic situation could become explosive — especially in countries with the highest proportions of youth.

The cases sketched above underline the potential of trust-minimized money to become an enabler of trades both nationally and internationally, and to help human society scale as it is universally interoperable, cannot be devalued or confiscated, and can bypass the constraints of the legacy, trust-based banking system.

The Freedom Ladder

Bitcoin can be seen as a polymorphic tool that adapts to the needs of each new user. Bitcoin as a privacy tool or means of self-sovereignty has been its predominant narrative, however self-sovereign identity (SSI) is a concept of the global “rich” that stands outside the reach of the 800 million people who do not have access to electricity, telephones or internet connection (figure nine).

It should also be noted that the introduction of Bitcoin alone is not enough to lift the global population out of extreme poverty. Donations and development programs need to be coordinated with local agents of change, like those being carried out by the Built With Bitcoin Foundation.

Based on the concept of a “sovereignty staircase” and later elaborated by Anita Posch, below we depict the relationship between the potential threats and living conditions faced by individuals, groups of people and society, with the freedom that stands to be ushered in by Bitcoin. We generalized this concept beyond individual sovereignty because, as mentioned above, this concept still remains abstract to a large part of the population.

This “freedom ladder” illustrates how Bitcoin is poised to bring about a range of solutions that will make it possible to overcome numerous threats on an incremental basis. Although the level of threat faced by an individual living under the oppression of an authoritarian regime or for a group of migrants fleeing an economy ruined by inflation differs, Bitcoin provides solutions for a variety of situations.

The bottom of the ladder includes infrastructural requirements, as these basic needs should be addressed prior to considering access to Bitcoin.

Figure nine: Freedom ladder 

There are extreme situations that may force some populations to jump straight to the highest rungs of the freedom ladder in order to protect themselves from sudden and violent threats. However, for a user or a group of people to understand what self-custody or anonymous transaction involves, it is often necessary to have experienced external threats over a longer period of time, sometimes incrementally, much like a primed immune system that can better withstand being exposed to external attack.

Conclusion

Bitcoin is a unique invention in many ways. Unlike the other great inventions of the modern era such as electricity, the computer or the internet, whose early adoption was initiated by either private companies or public institutions, Bitcoin has always targeted individuals: the marginalized and misfits of the system.

Bitcoin adoption is quiet and goes almost unnoticed by the mainstream agents of influence. Designed to scale by minimizing trust and eliminating dependency on third parties, it is difficult to obtain reliable aggregate data on the extent of Bitcoin adoption by a given country or a segment of the population. The permanent evolution of the protocol — of which Taproot is the latest example — reinforces this privacy and scalability goal and will continue to make attempts for quantitative analysis challenging.

Many questions remain unanswered about hyperbitcoinization and its micro- and macroeconomic consequences. This article attempted to identify emerging scenarios that may lead to hyperbitcoinization. However, it remains difficult to predict how these different scenarios will relate to one another, and at what speed they or any other possible scenarios may occur.

Many challenges remain to be solved before we see a broader adoption and, as Ray Youssef, CEO of Paxful, stated in an interview with these authors, it is crucial to relentlessly educate users, improve their experience and above all adapt the narrative to make Bitcoin more inclusive.

This article sought to identify and categorize initiatives that could lead to hyperbitcoinization, thereby transmuting expectations into reality. Although the mere prospect of hyperbitcoinization has raised immense hopes for many people, at this time we are still far from realizing the transformative power of Bitcoin in our lives.

In view of the dynamism of communities developing islands of resilience across the world, it is not hard to imagine how the voluntary actors of hyperbitcoinization will likely arise from grassroots initiatives, while governments and central banks — through their binding interventions — will unwittingly become its involuntary actors. This hypothesis resonates with the original vision of Bitcoin that it still carries to this day: a P2P electronic cash system.

We would like to express our gratitude to Anita Posch, host of the “Anita Posch Show” podcast; Yusuf Nessary, co-founder and director of the Built With Bitcoin Foundation; Ray Youssef, CEO of Paxful; Fodé Diop, founder at Bitcoin Developers Academy; Bernard Parah, CEO of Bitnob; Gael Sanchez Smith, author of “Bitcoin Lo Cambia Todo”; and Galoy´s team for sharing with us invaluable insights during our interviews; and to Jennifer McCain for reviewing overall readability.

References

  1. Antonopoulos, Andreas M., and Stephanie Murphy. 2020. “Bitcoin Q&A: Climbing the Sovereignty Staircase [2020].” YouTube. https://www.youtube.com/watch?v=pOVm8YK3A_0.
  2. Diop, Fodé. 2021. Author interview.
  3. Dixon, Simon, Max Keiser, and Samson Mow. 2021. “Bitcoin Volcano Bond.” https://www.youtube.com/watch?v=uCRgE4GY1g0&t=7s&ab_channel=SimonDixon.
  4. Gigi. 2019. 21 Lessons: What I’ve Learned from Falling Down the Bitcoin Rabbit Hole. Vol. p117. N.p.: Amazon Digital Services LLC – KDP Print US.
  5. Hayek, F A. 2005. In The: Legacy of Friedrich Von Hayek, 127-129. Vol. 2. N.p.: Liberty Fund.
  6. McCook, Hass, and Stephan Livera. 2021. “SLP288 Hass McCook – Why You Must Set Up A Bitcoin DCA Plan.” Stephan Livera. https://stephanlivera.com/episode/288/.
  7. Mimesis Capital and Joe Burnett. 2021. “Valuing Companies Post-Hyperbitcoinization.” https://www.mimesiscapital.com/. https://www.mimesiscapital.com/research/valuing-companies-post-hyperbitcoinization.
  8. Minting coins. 2017. “#88 Hyperbitcoinization + SEC Meeting, Overstock, Google, & Byzantium Metropolis.” YouTube. https://www.youtube.com/watch?v=PgjmSGjjRvo.
  9. Nessary, and Youssef. 2021. Authors´ interview.
  10. Parah, Bernard. 2021. Author interview.
  11. Posch, Anita. 2020. “Part 4: If Bitcoin Works in Zimbabwe, It Works Everywhere – Bitcoin in Africa: The Ubuntu Way – The Anita Posch Show.” Bitcoin & Co. Podcast. https://bitcoinundco.com/en/africa4/.
  12. Posch, Anita, and Joshua Scigala. 2021. “#133 Joshua Scigala: Bitcoin and Decentralized Stablecoins.” YouTube. https://www.youtube.com/watch?v=byhZkdQdbME.
  13. Pysh, Preston, Adam Back, and Samson Mow. 2021. “A Sovereign Bitcoin Bond in El Salvador w/ Adam Back & Samson Mow.” https://www.youtube.com/watch?v=zvJ1kdtTzXw.
  14. Skogqvist, Jackline Mwende. 2019. “THE EFFECT OF MOBILE MONEY ON SAVINGS BEHAVIORS OF THE FINANCIALLY EXCLUDED.” Södertörn University | Institution of social sciences, (05).
  15. Suberg, William. 2021. “Netflix ‘might’ be next Fortune 100 firm to buy Bitcoin — Tim Draper.” Cointelegraph. https://cointelegraph.com/news/netflix-might-be-next-fortune-100-firm-to-buy-bitcoin-tim-draper.

This is a guest post by Fulgur Ventures. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

With Bitcoin, Africa Is Becoming The Undisputed Leader of Financial Liberation

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With a population rapidly adopting Bitcoin, Africa is dismissing classic narratives and becoming the world’s epicenter for the financial future.

Africa is leading the way for global Bitcoin adoption — pioneering the first truly peer-to-peer movement on the ground. While many parts of the developed world are fixated on the speculative activity of bitcoin, people in Africa are teaching us about its true use cases and the opportunity it presents for greater financial inclusion of the underbanked.

Much of history is rooted in the Western narrative that paints a negative picture of Africa, associating the continent solely with poverty, disease and corruption. But their role in this financial revolution tells a different story. We are seeing an unrivaled explosion of wealth, technological advancement and ingenuity that speaks volumes.

After all, Bitcoin is for the millions, not the millionaires. It’s often forgotten that the Bitcoin white paper spoke about Bitcoin as a peer-to-peer financial system for the masses. For example, the first sentence of the Bitcoin white paper stated, “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” In order to carry out its true purpose, we need to focus less on minting quick millionaires through speculation and meme coins, and focus our efforts on Bitcoin as a means of exchange.

A Bursting Economy

Africa was cited as the third-fastest growing cryptocurrency economy with Kenya, Nigeria, South Africa and Tanzania ranking in Chainalysis’ Top 20 Global Crypto Adoption Index. Its widespread adoption in Africa is clear as Bitcoin bridges the economic gap, fulfilling both personal finance needs and entrepreneurial ventures, including remittance, e-commerce, payments, wealth preservation and social good. With over half of the population of Africa without a traditional bank account, Bitcoin provides a solution for the unbanked by bringing financial services to anyone regardless of social class, location or income.

Other driving factors in the country’s mass adoption of Bitcoin include instability in the global financial markets, stringent capital controls on outflows, high transaction costs on financial services, among many others. This is compounded by the economic impact of the pandemic, which has affected most economies around the world.

Narrowing in on the political landscape in Nigeria, the Central Bank of Nigeria (CBN) placed a ban on all regulated financial institutions from providing services to crypto exchanges in the country. In late October, it introduced the eNaira, hoping to reduce interest for those wanting to use Bitcoin. But despite these efforts, the use of Bitcoin has continued to flourish across the country with Nigerian youth mobilizing and leading the charge.

The New Generation Of Nigerians

Ray Youssef at the opening of a Built With Bitcoin Foundation school in Nigeria.

The youth are the bedrock on which a country’s growth and development is predicated. Nigeria has one of the youngest populations in the world, with over 75% of its population under the age of 35. Highly determined and resourceful, the youth of Nigeria are leading the continent into the financial golden age.

Take Joseph Ebuka for example, a Paxful user in Nigeria who buys art pieces with bitcoin. Most of his earnings are in cryptocurrency and it’s more convenient for him to pay for goods and services with bitcoin. Stories like Ebuka’s are redefining our understanding of the use cases of Bitcoin and highlighting its importance in everyday transactions.

The entrepreneurial spirit combined with the intense drive and business aptitude of the Nigerian youth is ultimately fostering a grassroots economy, one that we should all be paying greater attention to.

Boots On The Ground

Mass adoption of Bitcoin begins and ends with education. Financial literacy should be a right, but many people are denied this — and with that comes isolation from the global economy. For the people of developing nations, Bitcoin can be a gateway to a brighter financial future through its different use cases, but we need to continue to highlight its real value and untapped potential. It is our responsibility to provide education on the opportunities that Bitcoin can provide for financial freedom.

To take us to the next level, we need to embody the “boots on the ground” mentality. In 2021 alone, I traveled to Africa to open two schools through the Built With Bitcoin Foundation, launched the PaxNaija Educational Center to empower Nigerians through Bitcoin education, and met with dozens of local community members on the ground. Everything I have learned about Bitcoin is from staying connected to the streets — watching, listening and emulating the hustling spirit of the Nigerian people.

We are living in the biggest financial revolution of our time. Africa has pioneered Bitcoin as a means of exchange in a financial system that is broken, tearing down stereotypes along the way. The next 10 years will be the brightest in human history.

This is a guest post by Ray Youssef. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Africa’s Poised For A Bitcoin Revolution In 2022

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The continent has ripe conditions for Bitcoin to become the most common way to store and preserve value.

Africans stand to gain the most from Bitcoin and they are quickly realizing this fact and spreading the word. Most know that our corrupt “leaders” will not embrace the path to prosperity that El Salvador is on, due to their own self-interest. By opting out of the fiat-based legacy financial systems holding us back, we will create the change we want to see.

Bitcoiners in Africa are building and actively engaged in this peaceful monetary revolution. Let’s explore themes that will ensure more Africans are onboarded to the Bitcoin standard in 2022.

Trail Blazers

Orange-pilled Africans are leading the charge toward hyperbitcoinization by building the infrastructure needed to onboard fellow Africans to this idea whose time has come.

Ejara founder Nelly Chatue Diop is an inspiration for the world-class platform she is building while empowering women and girls in the continent to be all they can in this new industry. The Ejara wallet is true to the Bitcoin ethos of “not your keys not your cheese.” Self-custody will shift Africans’ mindsets to self-sovereignty, ensuring they do not give their hard-earned wealth to banks in unsecured loans, aka deposits.

User-owned Internet

New infrastructure is making it possible for talented African artists, content creators and musicians to totally cut out the middlemen agencies who often take a huge share of their revenue.

Lightning payments on social media platforms such as Twitter enable people to actively grow their community while getting paid directly for the value they put out to the world.

Great minds, such as former Twitter CEO Jack Dorsey working full time on Bitcoin at Spiral, are sure to offer Africans greater ways to reach international markets from which they have traditionally been marginalized from.

Initiatives by Africans for Africans, such as the Bitcoin Developers Academy by Fodé Diop, strives to teach African youth the skills they require to work on Bitcoin.

Getting Paid In Bitcoin

The new normal has seen African youth and young adults shift more to working remotely as job opportunities in the continent are very few, especially for the former who make up the biggest demographic. “Number go up” technology has made them cognizant of the opportunity of getting the most out of their time and effort by being paid in the best store of value on Earth, bitcoin.

On December 6, 2021, Bitwage made the world’s first salary payment via Lightning. This is revolutionary as Africans working remotely now can be paid instantaneously without huge service charges levied by Western Union, inconveniences of using PayPal when they decided to block access to one’s funds, or the several business days banks take to process wire transfers at exorbitant fees.

Getting paid in bitcoin will ultimately enable Africans to save more as no one wants to sell their sats. They will sell the amount they need to on P2P exchanges and safely self-custody the rest in affordable cold storage or hardware wallets such as Coldcard.

Free online courses with accreditations at Saylor Academy are already giving Africans the opportunity to get higher education thus very good jobs in the Bitcoin ecosystem internationally. Unemployment being very high in Africa, these are just some of the avenues people will explore to not just make ends meet but thrive in this new industry.

As an alumni of Pomp’s Crypto Academy on a full scholarship I know firsthand the great value to learn from world class coaches. Being part of a network laser focused on delivering value will empower like-minded Africans to get their stride and make meaningful contributions in this space.

Ease Of Use

Applications developed by Bitcoiners to specifically make onboarding people seamless with all the technical aspects all running safely on the backend such as the Hexa wallet will make it easier for millions of Africans across the continent to buy and hold bitcoin.

Sending and receiving sats through an experience devoid of mini heart attacks as a result of very long addresses guarantee that “Wanjiku” or “Akinyi” in the village can use Bitcoin without feeling intimidated.

Africans living in the diaspora can send sats to their friends and family as easily, moreover cheaply, as the numerous video or voice calls they use to communicate with them on WhatsApp, Signal or Zoom. The world becomes a global village due to monetary value being moved through space instantaneously.

Don’t Trust, Verify

Rug pulls such as “Squid Game” prove to Africans that they need to go down the Bitcoin rabbit hole while doing due diligence to avoid scams in the crypto space that can lead them to losing their money as various pyramid schemes have done.

Source: CoinMarketCap

Reputable publications providing legitimate educational content in innovative ways (e.g., 21DaysOfBitcoin), along with consistent reporting on countries, corporations, leaders and celebrities who opt-in to Bitcoin on a daily basis, will encourage Africans to fully understand the legitimacy of bitcoin as the best asset they can ever own.

Level Up

Buy and hold is the most recommended strategy, however, those with a slightly higher risk appetite can earn and borrow on the blockchain from their phone. This is a strategy many Africans can use to earn especially due to compound interest propelling them to better financial standing.

Following Dan Helds two-year journey on how to earn yield, with strategies such as covered calls, is another great way that Africans can quickly utilize to learn from legitimate industry leaders and start earning more sats.

Wakanda Forever

From the golden era of Mansa Musa being the richest person who ever lived to the current richest human being and Forbes person of the year 2021 who hails from South Africa owning bitcoin, Africans know that they need to be on the right side of history during the largest wealth transfer in modern times.

This is a guest post by Guantai Kathurima. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Report: Traditional Banks in Africa Hold Trust Advantage Over Fintechs

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A recent report by CR2 on Africa’s fintech transformation suggests traditional financial institutions can still be a part of the fintech financial revolution if they leverage one of their most significant assets: client trust.

Partnerships Between Banks and Fintechs

The report urges financial institutions that wish to accelerate their advance to success in the fintech space to forge partnerships with fintech startups and technology companies. Having such partnerships, as well as their longstanding client networks and more defined regulatory environment, means financial institutions can still grow their share of Africa’s digital market.

To illustrate the importance of the collaboration between banks and fintech, the CR2 report makes reference to the story of how one Nigerian bank, GTB, lost clients after its mobile banking platform went offline. The report then contrasts GTB’s misfortunes with the rise of the VC-backed fintech startup Kudabank, which saw its customer base rise from 300,000 to 1.4 million in less than three years.

However, the report argues that traditional financial institutions can still compete with VC-backed fintech startups if they decide to leverage their most significant asset: client trust. This perceived client trust advantage is backed up by a fintech study conducted in Nigeria by the consulting firm McKinsey Consulting.

Trust Remains Key

According to the findings of the study, about 67% of banked customers in Nigeria had more trust in their bank than in fintechs. Although this study concluded that Nigerian banks had occasionally made some missteps, it still found that there is still some hesitation by consumers to shift to fintech products. Therefore, while access and convenience are important considerations for customers, trust is still critical and this gives financial institutions the edge.

In conclusion, the CR2 report urges banks to seize the opportunity to grow their share of Africa’s digital finance market. The report says:

“Longstanding financial institutions must respond with innovation services built through collaboration with enabling digital banking platform partners. Those banks that pair their customer trust advantage to novel innovation on the product and platform side stand to excel in Africa’s 21st-century fintech landscape.”

Who do you trust more, traditional banks or fintech startups? Tell us what you think in the comments section below.