Bitcoin is the most celebrated variant of blockchain, and people are still divided about the digital currency
Is bitcoin the next wave of technology or is it a 'quail' investment? Many Kenyans must be wondering and there is a lot of discussion about the digital currency, whose price has gone up from less than $1,000 at the beginning of the year to pass $11,000 last week.
Bitcoin is the most celebrated variant of blockchain, and the world community is still divided about it and others like Ethereum, and LiteCoin. Will they represent the next generation of borderless financial capability and value transfer for an individual, one that brings independence from five centuries of banks and credit systems? Will bitcoin cause upheaval to the financial sector as Uber has done to the taxi business in different cities across the globe and as Tesla plans to do to the automotive business?
Or is it a flash in the pan? One which people are only buying into because they expect bitcoin will double and triple in value and then they will sell it for a profit?
There is a long history of such financial speculation, from Dutch tulips, British railways, the Asian Flu, silver in South America, housing in the US, and the dot-com bubble, and the current screaming headlines about bitcoin, and constant tracking and announcements of each new high bitcoin price has echoes of past bubbles.
Nobel laureates such as Joseph Stiglitz and Robert Shiller have suggested that bitcoin’s rise is unsustainable and a collapse is inevitable.
Whether in the US or Kenya, bubbles have patterns in which late investors rush in and buy off what early investors have hoarded to sell to new arrivals. Kenya itself has seen its share of speculative bubbles. There were the high-return-paying pyramid schemes in which thousands of Kenyans threw millions of shillings to double or triple their money in a month.
There were quail and fish farming ventures. There were IPO shares, plots of land by the SGR, and right now the country is making millionaires through sports betting and lottery draws. But the ability of blockchain and distributed ledgers to do good things like clean up land records in Kenya and end the practice of land parcels having two or more titles and being simultaneously sold to numerous innocent buyers is something to look forward to.
POTENTIAL SAFE SPOT
Financial regulators have taken different approaches to bitcoin. Some central banks have welcomed it, others opposed it and a few months ago, China’s shut down bitcoin exchanges in the country. In June this year, the Capital Markets Authority drafted rules under which financial companies can test products like bitcoin and blockchain in Kenya. And last week, the Chicago Mercantile Exchange announced they will form a bitcoin exchange.
But a Wall Street Journal story noted that almost no one is using bitcoin as a currency for exchange, and the recent price increases make it even less likely. For some users, it has come to be seen as a potential safe spot for citizens living in volatile currency markets such as Zimbabwe and Venezuela.
Back in December 2015, when the Central Bank of Kenya published a caution about bitcoin in Kenya, one company called Bitpesa replied and stated that bitcoin was a perfectly okay system that 4,000 Kenyans were happily using. Bitcoin champions here claim that Kenyans transact as much as Sh50 million a week.
BARAZA ON MINING DIGITAL CURRENCIES
Last month there was a case in the Kenyan courts in which people were accused of stealing Sh10.2 million from I&M Bank and Safaricom. There were news reports that they were bitcoin traders who tried to explain what they were doing and how bitcoin trading worked, and shared their message chat histories to document the transfers of money, and this will set a precedent for other bitcoin investors.
Finally, whatever your views and for anyone curious about bitcoin, you can attend a unique event — a Cryptocurrency Baraza — in Nairobi on December 10 where you will learn about how to mine cryptocurrencies, how to avoid scams, and also hear from some women who have found success with bitcoin. The entry fee is Sh2,000 payable through M-Pesa or bitcoin, with discounts for students.