Saturday 10 September 2016

A Nigerian Introduction To Bitcoin

If you are reading this article, it means you are probably interested in learning more about Bitcoin or its Blockchain.
And if you are a Nigerian, or any English speaking African for that matter, then you have come to the right place.

Here, I will be crunching all of the technical jargon and explaining the plain facts about Bitcoin in layman's English.
Much later on, I will go slightly deeper in explaining the Blockchain. (That article is now available by the way - click here)

Meanwhile, beyond that, I will be exposing how Bitcoin relates to the other transformative digital technologies that I have been following (including the Semantic Web, Internet of Things, Artificial Intelligence, Big Data Analytics, etc).

But for now, let us talk about Bitcoin....

What Is Bitcoin?

First of all it is not a coin.
It is a cryptocurrency. It is also a kind of software with its own game changing platform.
It is really important you understand that second part if you want to benefit as a young African entrepreneur or computer programmer.

Here is a funny way to look at it:


I am sure you all know how incredibly beautiful Hausa girls are, right? Okay, I am not saying that Ibo or Yoruba are ugly - only that I went  to secondary school in Zaria, and anyway, you get the picture.
So now, imagine you meet a very beautiful Hausa girl. Then imagine that, for whatever reason, you never tried to get to know her.

So now you are chatting with your friends about this lovely girl you just saw, and you are only talking about her incredible eyes and the way she looked at you with them.
You mention how you could easily tell what her lovely dark skin would feel like. You also had to mention her great round.......okay this is not that kind of story.

My point is that because you did not take the time to dig deeper, you missed out on the fact that this chick has a Masters Degree in Plant Breeding and Genetics, she owns a 1,000 hectare farm in Kaduna where she employs 500 young farmers, and she feeds hundreds of kids everyday; for free, while providing computers and smart phones for them to get an education. 

This is what is happening with Bitcoin today. 
And that, my brethren, is an OPPORTUNITY for YOU!

Most people constantly debate and postulate about what the  value of the currency is, or should be, or whether or not is has any intrinsic value.
This is so foolish! 
Very few people actually pay attention to what is happening underneath...... 
And what is hapening underneath is what is so huge about Bitcoin!

So stick with me, by following my blog.   Click here to ► Follow DigAfrica

But for now, let me just give you a few ideas: 

Bitcoin : Cash & More, Much More

Started in 2009, Bitcoin was meant to bring to the world, an anonymous, person to person transfer of money on the internet. It was designed to behave very similar to the way actual cash behaves. 
It is also meant to do this while bearing very low transaction costs for the sender, in comparison to current online banking transactions.
They call it the Money Transfer Protocol of the internet.

But before I come to explain the meaning of cryptocurrency, let me first of all mention that there are two distinct ways to look at Bitcoin:

There is bitcoin the currency (spelled with a small 'b').
And there is Bitcoin the software and protocol
So kindly take note of the difference in the usage of either small or capital letter 'B'.

The Bitcoin Software

The Bitcoin software was originally designed by a computer developer known as Satoshi Nakamoto. He designed it to manage a very high security peer to peer network using a technique known as public key cryptography

It is this cryptographic technique employed by the Bitcoin software that gives the bitcoin currency a very high level of security from hacking or theft as it is transferred from person to person throughout the internet. This cryptographic technique usage is the reason why it is called a cryptocurrency.

What Is a Cryptocurrency?

It is a kind of virtual currency that mostly tries to behave like cash, but with other programmable functions. On the internet, bitcoins can be sent or transferred from person to person like cash moves from hand to hand, without the need of a bank or  any other middle-man. 

Everyone understands how cash works: We see our naira notes, South African rand and US dollars as currency.
They are legal tender each within their respective countries.

You can confidently hand over the keys and the documents of your old car to someone if they give you raw cash.
As long as we can tell that the cash notes are not fake, we readily accept them as payment for anything.

However, whenever we have gathered lots of this cash, we no longer trust ourselves enough to keep all of it safe. Therefore we take most of it to the bank (a middle-man).
This is because we trust those banks, and we trust our government's central bank to protect the value of our money.

Trusted Third Parties 

Nevertheless, some people have argued that all the trust we place in these third parties (like banks) is a little too much, and therefore easily abused. Bitcoin was invented to remove this need to trust any human being or organization with our money.

This is why bitcoins acceptance is growing around the world at an increasing rate, and its value is increasing along with it. Many bitcoin users around the world no longer trust their government or their banks. Instead they trust the Bitcoin software because of its cutting-edge security and faith that its global value will continue growing in future. 

Meanwhile cryptocurrencies have much more functionality than normal money. For example, bitcoins are designed to be spent anywhere in the world. This is because it is completely decentralized and has no ties to any one country's central bank. 

As emails are to letters, so are bitcoins to cash

We know that emails do exactly what posted letters do, but also that emails can do a lot more than paper letters.
Apart from the speed of an email and the fact that you can send the same email to many people at the same time, emails can also have attachments in them, which can be videos or other digital media. 
Letters cannot do anything like this. 

So also cryptocurrencies have several functionalities that paper cash does not have. And I will look into these in a future post. But for now, some of those include assigning additional values to your money, ensuring the money behaves in a specific way, creating and enforcing legally binding contracts without the high cost of lawyers, etc. 

Not A Ponzi Scheme

Now, for those who are asking whether Bitcoin is a ponzi scheme, some zealous websites out there are selling ponzi schemes while using the word 'bitcoin' to draw attention to themselves.
It is very important to note that Bitcoin has nothing to do with these ponzi schemes or any other kind of network marketing schemes. 

Ponzi schemes are fraudulent businesses that use multi-level marketing (MLM) strategies that give the early investors a hope of getting rich quickly by inviting other investors (or down-lines). Ultimately, the business isn't selling any product of actual value, and at the end of the day, only the earliest investors earn any profit.  

Investing in bitcoins on the other hand, means that you are simply collecting virtual currency that has been increasing in real monetary value (it started as $0 in 2009; now worth $624 as of today), and allows you to spend and receive money from across international borders without needing a bank, or Western Union, and their typically exorbitant transaction fees.

This can be very good for Africa.
But also take note that I am not saying that Bitcoin is perfect, or that you should go and invest everything you have in it.
No. Certainly not. Please always be careful with how you digest information. 

What I am really saying here is that I think it is quite important to, at least, pay close attention to it, as Bitcoin looks like a world changing technology in the making. 

Bitcoin And The Blockchain

Now, Bitcoin is primarily a software that secures the bitcoin currency. It also sets it immutability.
By this I mean that once a bitcoin has been spent online or transferred, it cannot be reversed. 
The only way you can get a bitcoin back after sending it to someone is if that person agrees to send it back to you in another transaction.

The Bitcoin software governs this highly controlled and secure behavior of bitcoins thanks to the blockchain
The blockchain is a kind of database or ledger that records and stored all bitcoin transactions and is protected by cryptography, and is publicly and transparently maintained by the entire growing Bitcoin network of users.

I will write more about this blockchain and other blockchains in the future. I will try to explain some of its technical aspects in simple terms and also show examples of where the technology is already being used. This is because I believe that Africa needs an early invitation to come and learn one of the likely leading technologies of the next digital revolution and fourth industrial revolution. Blockchain technology is in my opinion, perhaps even more important than the Internet of Things, than Smart Cities, or than the Semantic Web.

What's Next With Bitcoin?

A lot!
As though the future wasn't already promising a lot of major digital technological wonders, Bitcoin has come and added a new dimension.

The recent success of Bitcoin across continents has not only raised the value of the currency and its usage and acceptance, it has also sparked off the development of other cryptocurrencies, each with their own blockchains. 
And of course, you can expect that I would be following these trends. 

Some have argued that the value of one Bitcoin could eventually reach $ 1 million by 2025. But such speculations are not my concern. I focus on understanding and analyzing the technology and especially how it can be useful to Africans and to Nigeria. 

Again, I will encourage you to follow this blog if you wish to learn more about the future of money. Or you can also find my other articles in newspapers by searching on Google for "Rotimi Orimoloye Bitcoin News" or "Rotimi Orimoloye Digital Africa". 
if you are interested in other digital technologies and how such information and knowledge can improve the quality of life of Africans.

So what are you waiting for? Go and start getting your bitcoins!
And if you don't have enough money to buy the minimum of $10 worth of coins, the good news is that there are a few websites that give out free bitcoins. Not much, but enough to get you started with Bitcoin and to transfer small change among your friends, just to know how Bitcoin works. Here is one of such websites

If you have any questions about this topic or anything to add to this article, please feel free to use the comments below. 
I am always happy to engage in the conversations that can more Africans forward. 

If you liked this, kindly re-share on social media so that other Africans will get a headsup.

Thank you so much.