Africa’s initial introduction to blockchain technology was through cryptocurrencies. But while cryptocurrencies are an easy sell for people looking for high-yield assets, they don’t scratch the surface of the potential that blockchain technology portends for Africa’s digital economy drive.
Gartner forecasts that the business value generated by blockchain will grow rapidly, reaching $176 billion by 2025 and $3.1 trillion by 2030.
According to a report by Chainalysis, Africa amassed $105.6 billion worth of cryptocurrencies in forecasts between June 2020 and June 2021, driven by peer-to-peer (P2P) transactions in key growth markets. Cryptocurrency adoption in Africa grew 1200 percent between July 2020 and June 2021, making it the fastest adoption rate in the world.
However, blockchain offers much more than cryptocurrencies. Companies that are uncovering the wider potential of blockchain are starting to deploy more investments to scale blockchain in other areas of the economy. The latest report on blockchain funding by CBInsights reveals that Global venture funding to blockchain/crypto startups reached $15 billion in just the first 9 months of 2021. The year-to-date total is already up 384 percent compared to 2020’s 12-month total of $3.1 billion. The same period also saw the birth of 12 blockchain unicorns.
A whitepaper released by Interswitch projects blockchain as the future of the digital economy. Many African countries including Nigeria are pushing aggressively to digitalise their economy in no distant future.
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The company, which became the first fintech company in Africa to reach unicorn status – over $1 billion valuation – is channeling its energy in pushing for the adoption of blockchain. Apart from releasing a whitepaper, Interswitch has also partnered with Interstellar, a technology company that powers critical blockchain infrastructure for digital payments and financial institutions in Africa.
“We are particularly excited about our partnership with Interstellar with whom we are developing a native blockchain infrastructure that is tailored to suit the African market,” said Akeem Lawal, Managing Director, Transaction Switching and Payment Processing (Interswitch Purepay). “This initiative will deepen digital payment, lower the cost of local and cross border payment as well as champion the cause for localisation of emerging technology.”
The whitepaper defines blockchain as a chain of blocks that solves the problem of centralisation, in line with the saying that blockchains are decentralised digital ledgers that utilise cryptographic algorithms to verify the creation and transfer of digitally represented information over a peer-to-peer network.
It also notes that the boom in blockchain investments in Africa largely driven by gains in cryptocurrencies is expected to become the order of the day in different segments of the continent’s economy.
Some African countries are increasingly looking in the direction of blockchain, especially in the banking and finance sector. In South Africa, banks such as B&A, First National Rand, Investec, Nedbank, Standard Bank, and the South Africa Reserve Bank now use encrypted, secure distributed databases. The private banks have adopted a private blockchain while the rest have adopted public blockchain, the whitepaper noted.
Blockchain technology adoption is also gaining ground in Kenya especially with the introduction of BitPesa, a money remittance platform that converts digital currency such as Bitcoin to the Kenyan currency without the involvement of third parties. Nigeria also recently became the second country in the world to introduce a central bank digital currency built on the Bitt Inc blockchain.
Apart from offering digital assets, there is also smart contracts, transparency, and security that blockchain technology offers the financial services industry. Blockchain has the potential to make the financial services industry more transparent, less susceptible to fraud, and cheaper for consumers. The different segments of the financial sector like the capital market, asset management, payment and remittance, banking and lending, trade finance, insurance, etc. can take advantage of revolutionary technology and adopt it in their business operations.
Blockchain beyond financial services
Education is one sector that urgently needs blockchain integration. According to the whitepaper, due to the diversification of the sector which was also precipitated by the pandemic, methods, and operations within the sector have changed. Issuance of certification, storage of educational credentials, payment of fees, etc. are processes that can be done seamlessly via blockchain technology.
Blockchain integration in land management can also ease the process of ownership and protect buyers from forged documents. The whitepaper notes that this can be achieved on the blockchain by storing information on the ledger. Because of the decentralised nature of blockchain, information cannot be forged, and transparency is maintained with the transfer of property ownership. For example, Sweden, Georgia and Ukraine16 property registers are being moved on to the blockchain.
The legal system can leverage the benefits of a smart contract. A smart contract, which is a set of promises, in digital form that relies on blockchain technology to prevent falsified documentation, can seamlessly be adopted and automated with blockchain technology. Contracts, transfer of ownership, delivery of goods or services can be traced without the need for a trusted third party.
Blockchain also holds promises for governance as it engenders transparency in government processes and could help secure an online voting system and control of public expenditure. For example, Nigeria which is heading to the polls in 2023 can tap blockchain technology to drive the e-voting system the Independent National Electoral Commission (INEC) plans to integrate. Citizens’ data can also be managed and securely stored on blockchain-enabled platforms.
In the health sector, blockchain can provide secure storage for patients or medical reports to ensure smooth flow of operation, in terms of transfers, within hospitals. Patient care and health personnel duties are generally improved, as records are easily accessible and continuously updated.
Blockchain can also help companies make supply chains, shipments, and deliveries completely transparent. The use of blockchain could bring more trust for operators in the supply chain market.
“With a very promising future, it is important that both private and public stakeholders make necessary adjustments and infuse blockchain technology into their policies. It is important that stakeholders invest in proper infrastructure, engage responsible bodies with the aim of influencing policy and regulation changes that will favour the adoption of Blockchain technology,” Interswitch noted in the Whitepaper.
