While the main application of crypto in Africa is still gravitating towards foreign remittance, the 2021 pandemic accelerated the growth of interest in cryptocurrencies as a source of passive income. The trend has already brought the first movers the first low-hanging fruits – bitcoin investors that bought assets in 2020 have already made over 550% profits.
Fertile lands for crypto mass adoption
The African continent accounts for only two percent of the global value transacted in all cryptocurrencies, according to the Chainalysis report. But the status of the smallest cryptocurrency economy does not preclude Africa from being called one of the most promising regions for the crypto market. For example, in the research report “The State of Crypto-Africa”, the market analysts note that “the unique combination of economic and demographic trends” make the African market “one of, if not the most promising region for the adoption of cryptocurrencies”.
In many ways, its unique position comes from the fact that the proportion of the unbanked population in Africa is stunning, so citizens are forced to look for alternatives. As a result, the adoption rate of the newest financial instruments outgoes other continents. Even the rural population in Kenya are used to digital wallets and e-payment systems.
Many specialists notice the high rate of adoption of new technologies. For example, Sergey Ordin, marketing director of the international crypto community Roy Club, which has representatives in African countries, points out to the fact African citizens “have no problems with mastering new technologies”:
“They have remarkably high interest toward innovative financial opportunities with low entry levels, especially among young generations that are looking for ways to financial independence”
According to Ordin, this is well reflected in the Roy Club’s statistics: while the club has opened its local offices only in 2021, the number of local participants has already reached 15% out of all participants from all over the world – roughly 100 000 out of 700 000 club members.
The crypto fertility of the African continent does not come unnoticed by the traditional tech gurus as well. Jack Dorsey, the CEO of Twitter and Square, even stated that “Africa will define the future” of the crypto industry.
From remittance to financial independence
Up to the middle of 2020, the main application of cryptocurrencies in the African continent gravitated towards remittance. There is hardly a surprise that locals actively looked for alternatives with the commissions offered by the traditional instruments: on average remittance payments might cost up to 8.9% per transaction while the global average is 6.8, according to the World Bank. Cheap and fast money transfers were the first niche where cryptocurrencies proved their usefulness to the local users.
2021 amended the usual ways of living in many countries and African countries were no exception to the rule. The pandemic worsened the economic landscapes for too many to be unnoticed. In that way, the economic crisis with growing unemployment rates and devaluation of the local currencies pushed local users that were already well-versed in digital instruments to look beyond remittance and start considering cryptocurrencies as one of the sources of income. The regional manager in Nigeria at Paxful Nena Nwachukwu stated that this trend goes beyond individuals to businesses:
“With devaluation and recession causing Naira depreciation, individuals and even businesses are looking to hedge the value of their funds using a good investment tool”
If we evaluate the profits for those who invested in bitcoin in spring 2020 we will see over 900% profits: the bitcoin has grown from $6500 in March 2020 to over $60000 in March 2021. Not bad for escaping the inflation which is, for example, approximately 17% for Nigeria per the National Bureau of Statistics.
Yet the bitcoin price growth is far from being constant. And its slowing down movement coincided with the growing interest in other ways to use cryptocurrencies as an investment. One of such ways to multiply assets is staking which is the mechanism of getting rewards from owning cryptocurrencies that work on the Proof-of-Work algorithms. As with mining, stakers participate in performing crucial network functions like validating transactions. But in comparison with mining, the entry barriers of which include highly expensive equipment and specific knowledge, staking can be started in an instant.
Moreover, there is already an infrastructure that helps people unite their resources together in so-called staking pools for improving the levels of rewards like the one offered by the staking pools of the Roy club. According to the Roy Club marketing director Sergey Ordin, the members of the staking pool UMI can profit from their assets from 5% (for pools with 50,000 UMI) to 40% (for pools with 1,000,000,000 UMI) monthly.
Sergey Odin also shared that the local interest in free educational products like Roy School and Roy Academy is very high in the African continent. The CEO of the African crypto exchange Quidax Buchi Okoro confirms that a high proportion of the users of the platform use it “to earn a living”.
Generally speaking, what makes Africa one of the most promising regions for crypto adoption is the complexities of the local economy with staggering inflation and high unemployment rates that increase the readiness of the local population to adapt new instruments coupled with the availability of free educational courses and local communities.