A SURVEY OF THE INCREASE AND USAGE OF CRYPTOCURRENCIES IN AFRICA

A SURVEY OF THE INCREASE AND USAGE OF CRYPTOCURRENCIES IN AFRICA

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Background of the study

Throughout history, people have exchanged products and services via a number of techniques and channels. Many of these methods and materials, such as metal coins or paper money, are typically physical.

Without a question, the global financial sector is embracing the most recent technology shift from actual cash to nearly abstract currencies. As a result of this increase, cryptocurrencies were formed. Cryptocurrency is defined as a digital record-keeping system that employs balances to monitor trading obligations and is open to all traders. Crypto currencies include Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Ripple (XRP), Bitcoin Cash, Neo, Iota, Dash, Qtum, Monero, and Ethereum Classic. A cryptocurrency system is characterized by two parameters: a 0 money growth rate and a 0 transaction fee charge. Numerous private cryptocurrencies have been launched since the establishment of Bitcoin in 2009. Since its inception, cryptocurrency has received a great deal of media attention, and its entire market value has reached 128.78 billion USD in 2019. It is based on a technology known as "Blockchain."

According to Nakamoto (2008), cryptocurrency is a peer-to-peer Electronic Cash System. The blockchain-based peer-to-peer structure of cryptocurrency allows transactions to take place directly between users without the need for a middleman (Hameed & Farooq 2016; Grech, & Camilleri, 2017). It conducts transactions between parties in secrecy, and as a consequence, the parties are ignorant of each other's genuine identities (Dierksmeier & Seele, 2016). Because the whole details of a participant's transaction on the bitcoin blockchain are publicly exposed to others, this may be necessary (Bech & Garratt, 2017). Unlike traditional money, which is released at intervals determined by each country's Central Bank, cryptocurrency such as Bitcoin is mined at a predetermined issuance algorithm, with the quantity of Bitcoins to be mined half every year.

The vast majority of financial institutions and governments have promoted online payment as a safe and quick method of exchanging actual cash. This cash usage approach is an effort to digitalize physical currency. In recent years, total and true digital currencies (i.e., no physical form) have been introduced on a regular basis.

Money's origins are uncertain, however coin and paper cash may be dated back to the seventh century B.C. (Dumas, 2015). While money hasn't changed much since then, its purpose hasn't altered: to facilitate transactions. Credit cards, internet banking, and bitcoin transactions are now possible.

Polillo (2011) developed an intriguing theory on currency production. The theory proposes that there are general social processes that allow diverse types of networks and organizations to establish currencies. He also offered the concept of money as "many currencies," arguing that civilizations continuously modify money in creative ways to better fit their requirements through social activities.

Berentsen and Schär (2018) confirmed that Bitcoin (the first acknowledged cryptocurrency) started with a white paper released in 2008 under the pseudonym "Satoshi Nakamoto," as it was distributed via a cryptography mailing list and had the look of an academic work. It was revealed that the original aim behind Bitcoin's creation was to create a cash-like payment system that allowed electronic transactions while still incorporating many of the favorable properties of actual currency.

According to Silva (2016), cryptocurrency is a system characterized by three main axes: first, a public system of transaction registration called block-chain, which serves as an accounting book of its entries and exits; second, an encryption algorithm called asymmetric encryption-associated with a proof-of-work, which is used to validate currency operations; and third, a public system of transaction registration called block-chain, which serves as an accounting book of its entries and exits.

Cryptocurrency is a virtual currency that employs a web-based communication system to facilitate the movement of wealth from one person to another; nevertheless, when the properties of money are considered, Bitcoin seems deficient. according to (Gulled & Hossain, 2018).

Some of the newer currencies are Litecoin (LTC), Ethereum (ETH), EOS (EOS), Cardano (ADA), NEO (NEO), Bitcoin (BTC), Monero (XMR), Ripple (XRP), and Dash (DASH).

1.2 Statement Of The Problem

Cryptocurrency is a type of digital money that is based on the cutting-edge blockchain technology. Customers include small businesses. Cryptocurrency is a type of digital money that is based on the cutting-edge blockchain technology. Its users include small businesses, financial technology startups, and retail consumers who use it to move money across borders and as an investment asset. Crypto assets, such as Bitcoin and its predecessors, also known as altcoins, have grown in popularity as they have achieved widespread acceptance and use for purchases, trading, and banking. As of April 2021, Bitcoin, the most popular cryptocurrency, has a gross daily exchange volume of around $38.68 billion and a market value of $123.12 billion. (http://www.nairametrics.com)

Many Africans utilize cryptocurrencies for banking and money transfers, such as Ethereum, Ripple, Bitcoin, and Litecoin. The instability of local currencies is one of the factors driving the surge in bitcoin adoption on the continent. Most of the time, the high level of economic instability in most regions of Africa makes cryptocurrencies a feasible medium for holding money rather than storing its value. (Image courtesy of Vanguardngr.com)

Because it costs far less than many commercial banks in Africa, which charge exorbitant fees in an unpredictable currency market and unreliable economic ecosystem, it is a cheaper way for individuals and entrepreneurs to send funds to everyone around the world for remittance, vendors, e-commerce shopping, and to and from friends and family members located abroad.

As a result of smartphone saturation, many Africans in metropolitan areas have limited Internet connectivity, and such platforms have made bitcoin adoption available to all via mobile.

Financial tech businesses in Africa are using crypto-assets to disrupt the industry using developing technologies such as mobile currency. They are still employing Blockchain and cryptocurrencies to simplify their operations in Africa and throughout the world. Many of these firms have created blockchain tools, token exchanges, and money transfer services to meet the requirements of ordinary Africans.

Furthermore, in order to satisfy transnational vendors and consumers, many African enterprises and startups are accepting and paying in cryptocurrencies such as XRP, bitcoin, and bitcoin cash. Payfast, Gemini, Coinbase, Luno, Bitpay, Bitstamp, Bithumb, Binance, and other innovative payment gateways and exchanges based in Africa and throughout the world, such as Payfast, Gemini, Coinbase, Luno, Bitpay, Bitstamp, Bithumb, Binance, and others, have made this feasible for many Africans.

Luno Exchange, based in South Africa, is the continent's top cryptocurrency exchange. It was founded in 2013. It has over a million customers in over 40 countries and is Africa's first crypto exchange, with headquarters in Nigeria and South Africa. It supports the cryptocurrency trading pairings ZAR/BTC and NGN/BTC.

Since the 2008 global recession, crypto assets like as Bitcoin have been developed with the goal of developing a digital currency that is open and managed by consumers, focusing on cheap transaction costs, increased security, and simple access to its medium of choice.

Nigeria boasts the most biodiversity in Africa, but the government has failed to oversee its use and trade. Cryptocurrencies have been branded non-legal cash by Nigeria's central bank, prompting many Nigerians to ask for a reconsideration of the country's prohibition on cryptocurrency trading.

1.3 Objective Of The Study

The primary objective of this study is to critically assess the surge of cryptocurrencies and its usage in Africa. This study tends to find out if the unreliable local currencies of countries of Africa contributed to the surge of cryptocurrencies usage in the continent. This study also investigate if the high uncertainty of economies in most part of Africa makes cryptocurrencies a viable medium for asset management in lieu of storing its value.

1.4 Research Hypotheses

The following null hypotheses are formulated and tested in this study:

H01: The unreliable local currencies of countries of Africa did not contributed to the surge of cryptocurrencies usage in the continent.

H02: The high uncertainty of economies in most part of Africa did not make cryptocurrencies a viable medium for asset management.

1.5 Significance Of The Study

This study will be of significant benefit to all countries of Africa and the world at large because it will bring to their notice the benefit of cryptocurrencies and how it contribute to viable medium for asset management. This study will also help the government of African countries and the world at large to see the need to stabilize their economies and improve their local currencies value. This study will also serve as a benchmark for students, scholars and researchers who may want to carry out further research on this topic or similar area in the future.

1.6 Scope Of The Study

This study shall enroll staff of Paystack, Flutterwave, Remita and Interswitch in Lagos State as participants for this study.

1.7 Limitation Of The Study

The major factors amongst others that posed a challenge to the researcher while carrying out this study were insufficient time given for the study, inadequate literature on this topic, and insufficient fund.

1.8 Definition Of Terms

ASSESSMENT: the action or an instance of making a judgment about something

SURGE: a sudden powerful forward or upward movement, especially by a crowd or by a natural force such as the tide.

CRYPTOCURRENCY: is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward.

USAGE: the action of using something or the fact of being used.

AFRICA: Africa one of the 7 continents of the world. Africa is the world's second-largest and second-most populous continent, after Asia in both cases. At about 30.3 million km² including adjacent islands, it covers 6% of Earth's total surface area and 20% of its land area. With 1.3 billion people as of 2018, it accounts for about 16% of the world's human population.

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