This is really an article about a ledger and two ideologies
that compete to control it. One ascribes to a stateless society, defined by
self-governed voluntary institutions. The other looks to government and state
machinery for answers.
The State
As of this writing, there are more than two hundred
self-governing states in the world, this development became a reality over the
last 200 years as former monarchs lost their influence and power, and sold a particular
brand of government to the rest of the world.
The world was taught after two world wars that one of the primary
functions of a state was to offer security.
The functionaries that arose from the creation of the state;
be it the military, the police, the judiciary, administrators or the tax
collectors were not self-supporting so taxes were essential to allow the state
to function.
However, recently, people have lost their trust on the
system. The global financial crisis of 2007-08 raised questions about how much confidence
was being given to the banking system, and who it was really benefiting.
Fact is, central governments have allowed trade and commerce
to thrive and thus brought the rapid advances we have witnessed over the last
150 years. During this period, trade and commerce has also become extensively
complicated, it cannot be compared to the barter trade that sufficed in
stateless societies in the agrarian age. Today, complicated transactions
require resources to be shared among multiple people for them to perform work
that has no immediate value.
Technological disruption
Over the last two decades technology has disrupted every
conceivable industry and inspired governments to offer better services. We are living
in an era where the Western world is agitating for freedom and privacy, which
in all due respect is a fallacy in a state system.
Even so, technology is offering a way out that can transform
the basic pillars of our society, fundamentally affecting how governance and
business systems function.
Bitcoin, Blockchain and M-Pesa
Bitcoin is a digital payment system, a cryptocurrency
invented by Satoshi Nakamoto and published in 2008. Primarily, users can
transact this currency directly without needing any intermediaries.
The idea that you do not need any intermediaries is
groundbreaking. Normally trade is recorded through ledgers closed and isolated
from the public. To facilitate and approve our transactions we use third parties
and middlemen we trust these include: banks, governments, accountants and even
paper money.
The blockchain, essential to the distribution of bitcoins, is
a publicly distributed ledger shared by all nodes participating in the network.
Blockchain calls for us to fundamentally change to our conceptual understanding
of trade, ownership and trust.
M-Pesa is a money transfer and microfinance service that
allows users to deposit, withdraw, transfer money and pay for goods and
services. M-Pesa is pegged on a one-to-one basis with the local fiat
money.
Bitcoin’s value is not set by any single person and is
highly volatile, having gone through several appreciations and depreciations, over
the last four years from a low of $0.3 in 2011, to a high of $1,242 in November
2013, to a low of $293.70 on 11 July, 2015. This volatility is driven by bad press, which
scares bitcoins users into selling, and by increased speculation by investors. There
are a number of ways to hedge
from this volatility the only problem is that these methods have a long way
to go before they become acceptable
to the average consumer.
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| Bitcoin's volatility over time |
So why is M-Pesa so
successful in Kenya, and having trouble being accepted in other countries? And
what are the pitfalls that bitcoin has to overcome to become a system embraced
across Africa?
M-pesa worked in Kenya because regulation came after the
system had attained a tipping point. This piece
by Bobby Yawe, is an interesting read on the same. Two divergent views on a
mobile payment system, one seen as a financial solution, and pitched to the
Central Bank thus subject to red tape, the other shared with Treasury and
pitched as a way to create visibility to the Kenyan cash economy, which until
then was blind to the planners.
Also, M-Pesa initially was not seen as a threat by the
banking industry in Kenya until it was too late, it also helped that its
acceptance in the market was rapid and exponential. By the time banks were
waking to the reality of the disruption at hand, they were forced to embrace
what their clients had already integrated in their daily lives.
Safaricom invested in an agent network that spread countrywide,
making it very easy for the local fiat to be transformed affordably into a
digital format in one locale and changed back to the local fiat in another
locale within minutes and at no loss of value.
M-Pesa also used something that all its mobile users
utilized SMS/USSD, which allowed it to reach the rural citizen who could only
afford a basic or feature phone. Some even pooled resources to buy a single
phone for the village
Why
is this successful run not being witnessed in other countries like India and
South Africa?
The answer goes back to how M-Pesa
interacts with the regulators in these countries as it launches. Does it have
to go through onerous regulatory steps before being approved for the market,
and how easy is it for a customer to sign up or use the system? Are there other
more efficient, cost-effective systems in place to distribute the local fiat?
In South Africa this has called for a revamp of the solution and the need to
have agents where people live and work.
Collaboration is imperative, even as we
speak the M-Pesa system in Kenya is growing in bounds because it opened up as a
platform for to any business that offers goods and services. The more M-Pesa
meets the needs of different entities and consumers the more it will grow and
becomes central to the economy of a nation.
Bitcoin promises to disrupt the banking system internationally.
A number
of banks including Santander, one of the largest in the world, have taken
the time to study the blockchain and even develop their
own use cases.
For bitcoin adoption across the vast expanses of Africa and
for it to be acclaimed as the solution for the unbanked, a few determiners have
to be looked at carefully.
The technology needs to be adoptable to the masses, usable
on simple and feature phones, the pillar of the mobile revolution happening
across Africa. (37coins and CoinKite
offer to send bitcoins by SMS). Having said this, I will not discredit the
increasing number of smart phones across the continent, but the provision of
Internet services to the rural areas, will take a bit longer.
Innovatively collaborate with local mobile payment service providers
and have a clear plan on how not to cannibalize their current markets. Kipochi had to learn this the hard way
as they integrated with Safaricom’s M-Pesa network. They offered a service that
was a competitive threat to Safaricom’s dominant M-PESA money transfer business.
Kipochi, as of this writing, is no
longer in operation.
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| Source: http://coinbrief.net/debunking-kipochi-mpesa-bitcoin-kenya/ |
There are a number of use cases for bitcoin in Africa.
International remittance seems well publicized; with bitcoin
being touted as a cheaper alternative to high remittance fees that Africans face
when sending money back home.
Digital piracy is a big problem in Africa, with estimates of
less than 10% legitimate content. The problem affects music, movies, e-books
and so forth. If we identify a file as unique and associate it with the
blockchain, you can exchange that file for money, and even avoid its
piracy.
There is need to uniquely identify citizens in order to
offer them services. In fact the blockchain can be used to implement public records (birth certificates,
passports, voters IDs, land titles, the list is endless), private records (signatures, wills, etc.) and semipublic records (personal medical and accounting records) all
this from a bitcoin wallet that can be integrated on a SIM card; bitSIM promises to offer this solution and
more.
This becomes the precursor to a “state in a box”, a term
explaining how a technology; the blockchain, is able to carry out functions that
were previously the responsibility of a sovereign state be it property rights,
identity registers, electoral democracy, or taxation.
When you start to walk this path you begin to see the
power of the blockchain and its centrality to the future of mankind.
Sun Tzu once said “Keep your friends close,
and your enemies closer.” My advice to the incumbent, “keep your business
partners close and the disruptors even closer”.
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