“Don’t miss the wave” (Old saying – not limited to surfers!)
Bitcoin is a digital currency which has grown rapidly since its introduction in 2009. Recently the UK issued an e-money licence to a finance house and Barclays Bank has become part of this process.
What is Bitcoin?
It is a digital currency whereby you can, say, pay anybody in the world without an intermediary (a bank) involved. It is thus much cheaper than using a bank and potentially just as effective.
The main features and advantages
The founder of Bitcoin (still anonymous) built a robust system:
• The number of Bitcoins is limited to 21 million. This helps ensure that the intrinsic value of Bitcoins rises and is a hedge against inflation
• The system is controlled by no one and is completely transparent. Thus, anybody can check all transactions at any time. This is called the blockchain. The system is thus self-regulating
• Sophisticated cryptography protects the integrity of transactions. It is not possible to issue the same Bitcoin twice. If you do, your system will be out of line with other users
• It is done on open source software which is not difficult to follow, is free and accessible
• The system is easy to use.
What is the risk?
Like any online system it is possible for cyber criminals to hack into the system. The value of Bitcoins is also subject to volatility, so there is no guarantee of value although it has recently appreciated against the dollar (after dropping sharply in 2014). There is also no legal protection for Bitcoin (as there is for example with “legal tender” like the Rand) so you use it at your own “sole and independent risk” (that’s a quote from the South African Reserve Bank). Users can hide their identity so the potential exists for income tax fraud and evading exchange controls – which could bring unwanted attention from governments.
Applications in Africa
In Africa it has the potential for widespread use. The fact that Africa has many unstable currencies and has limited infrastructure means Bitcoins could be a “leap technology” that enables the continent to fast track economic growth, especially considering the widespread use of smart phones in Africa.
Bitcoins are here to stay and many commentators are calling them the next financial/banking disruptor. Don’t risk losing out – learn all about them now!