In Nigeria when you mention Blockchain, people are always like what is that?. But when you mention Bitcoin or Billion coin, they easily have an idea of what you are really talking about. A digital currency!.
In a country of booming fintechs and digital banking, the conventional way of banking is gradually being disrupted by emerging technologies. In this article, I will be giving an in-depth analysis on Blockchain technology and how it will affect Nigerians.
Blockchain is a type of distributed ledger or decentralized database that keeps records of digital transactions. Rather than having a central administrator like a traditional database, (think banks, governments & accountants), a distributed ledger has a network of replicated databases, synchronized via the internet and visible to anyone within the network. Blockchain networks can be private with restricted membership similar to an intranet, or public, like the Internet, accessible to the general public. Virtually anything of value can be tracked and traded on a Blockchain network reducing risk and cutting costs for all involved.
I will take a brief history of mode of money transaction so as to easily understand this technology in Nigerian parlance.
Historically, when it comes to transacting money in Nigeria or anything of value, people and businesses have relied heavily on institutional intermediaries like banks and governments to ensure trust and certainty. Banks perform a range of important tasks that help build trust into the transactional process like authentication & record keeping, financial due diligence, check, verification, etc. Also the time between transaction and settlement in Nigeria can be long and sometimes takes weeks if not months to reconcile accounts.
The growth of ecommerce, online banking and in-app purchases and the increasing mobility of Nigerians have fueled the growth of transaction volumes. Imagine 7 years ago when e-commerce was still relatively new in Nigeria and compare to the present age where we have hundreds of online stores conducting millions of transactions daily. Transaction volumes will yet still explode in the next 3-4 years in Nigeria with the rise of Internet of Things (IoT). To address this problems, we need payment networks that are fast and provide a mechanism for trust, requires no specialized equipment and does not charge us monthly for SMS and maintenance charges.
Having an intermediary in financial transaction most often creates extra charges and also double spending in Nigeria. Transferring money to my sister for example from my GTBank account to her First Bank account will cost me an additional 54.50 naira. This additional cost is for GTBank which is now an intermediary between me and my sister.
But what if there is a way of conducting digital transactions without a third party mediating? What if from the comfort of my phone or via an ordinary email, I can transfer some money to someone else without using a third party?
This is where Blockchain comes in. The technology seeks to block the intermediaries and also ensure a safe system of money transfer and transaction that is much more secure than using the intermediaries.
Examples of the technology that is popular and allow seamless peer to peer transaction is Bitcoin and The Billion Coin. Bitcoin currently holds more value than the US Dollar. One bitcoin is valued at almost 2500 USD. There are several other applications that rely on this Blockchain technology.
To easily understand, Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one. Another example is Ethereum public Blockchain which provides a way to execute peer to peer contracts. Also smart contract is another application which seeks to eliminate the need for a lawyer when preparing contracts and agreements.
Blockchain In Action – Examples of Various Use Cases
The use cases below scratches the surface of the potential of this amazing technology. As the technology matures, the list will grow.
1. Commercial financing e.g. cross border transactions, trade finance, etc
3. Government e.g. grant allocations, budget planning, etc
4. Healthcare – e.g. Electronic medical records, health care payment
5. Law –e.g. Smart contract*
6. The Internet of Things
*In another article, I will expand more on how Blockchain technology can uplift legal practice in Nigeria using Law Repository as a case study.
Advantages of Block Chain Technology
1. Blockchain is decentralized, open & its cryptographic nature allow people to trust each other and transact peer to peer, making the need for intermediaries obsolete.
2. Blockchain is highly secure. It is almost impregnable. This also brings unprecedented security benefits. Hacking attacks that commonly impact large centralized intermediaries like banks would be virtually impossible to pull off on the Blockchain.
3. Blockchain applications are extremely fast. Imagine transferring money without being dependent on bank bureaucracy. It will just be as fast as sending an email.
4. Blockchain is time saving. Transactions can be slashed from days to minutes.
5. Using Blockchain is cheaper as it eliminates the need for a paid intermediary. No bank charges, no extra cost, etc.
Problems with Blockchain Technology
1. As pointed out by the Central Bank of Nigeria director, Blockchain technology needs to be regulated. Currently there is not regulation in Nigeria governing the use of this amazing technology. But does Blockchain really need government regulation?
2. Who really owns Blockchain – Till now, we still cannot point to anyone as the person who started Blockchain. Many people believe the founder of bitcoin is acting under the pseudo name of Satoshi Nakamoto.
3. Blockchain technology might lead to job-losses across various sectors of the economy. Just imagine when you don’t need an intermediary for your transactions.
In conclusion, we live in a disruptive world- different technologies spring up every day challenging the older generation and making life much more easier for the modern age, Blockchain is set to change the world as we know it. With technologies such as Blockchain in existence, there is a lacuna in law that needs to be filled in order to ensure than mischief makers don’t turn this contemporary novel innovation into a curse. By enabling the digitization of assets, Blockchain is driving a fundamental shift from the Internet of information, where we can instantly view, exchange and communicate information to the Internet of value, where we can instantly exchange assets.
Blockchain will profoundly disrupt hundreds of industries that rely on intermediaries, including banking, finance, academia, real estate, insurance, legal, health care and the public sector — amongst many others.