Like artificial intelligence (AI) and cryptocurrency, blockchain has enjoyed a generous amount of interest in recent years.
By Michael Akuchie
In October 2021, the Nigerian government made history as the first African nation to launch a digital currency. Announced as an answer to the country’s age-old financial inclusion problems, the eNaira was also advertised as a potential driver of increased cross-border trade. In plain terms, it is considered a digital currency. For context, a digital currency is any form of payment that is entirely digital and governed by online means. eNaira, one of the first digital currencies in the world, was built on a blockchain network.
Blockchain is one of the many buzzwords on the internet today, but what exactly does it mean? Investopedia, a financial media website, defines blockchain as a shared ledger used for recording transactions for cryptocurrency systems in a secure manner – a cryptocurrency being a digital currency intended to serve as a means of exchange via an online system that is not governed by a central authority like a bank or government.
It is worth mentioning that the use case of blockchain is not limited to cryptocurrency transactions. It is applicable in healthcare, the voting process, and property records. Like artificial intelligence (AI) and cryptocurrency, blockchain has enjoyed a generous amount of interest in recent years.
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Blockchain is a system built on trust and transparency. Although its roots stretch back to the 1990s, it was officially introduced in 2008 by developers operating with the pseudonym, Satoshi Nakamoto. Nakamoto published a white paper explaining blockchain and cryptocurrency and how they would help foster a future of peer-to-peer transactions without the involvement of a third party like banks. Originally intended to store and secure digital data that is difficult to tamper with, it also has some interesting use cases. For instance, it can provide secure, unchangeable records that can be leveraged to discourage the misappropriation of funds among the political class. Since the records of transactions can be easily searched, there is a lesser chance of a politician risking their reputation to divert funds.
While Africa is yet to benefit from this particular use case, the South American nation, Peru, has taken a bold step in reducing corruption through the use of blockchain technology. In 2019, the government collaborated with Stamping.io, a blockchain startup, to build a verification portal for government contracts. What’s more, the data in those contracts will be impervious to manipulation.
Another example of how blockchain can be beneficial to Africa is in land and property management. Land in Sub-Saharan Africa and the rest of the continent has had a vast history of exploitation disputes and dispossession. One of the common kinds of land disputes in the region includes altercations between households or neighbourhoods. Authorities have proven themselves to be highly ineffective in managing the situation, and the issue is aggravated when each warring side has a certificate of ownership of the land. As such, it is difficult to tell which certificate is the true one. Fortunately, blockchain technology can remedy this problem due to its immutability. With blockchain in the picture, parties involved can easily access the record of ownership during a land dispute. It also ensures that potential buyers or current owners of the land can conveniently authenticate their claim to the property through the blockchain network. Rwanda recently took a step forward by using blockchain to facilitate land transactions.
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However, some drawbacks hinder the adoption of blockchain. To highlight this, let us continue with what proceeded with the launch of the eNaira. Upon launch, the Central Bank, previously governed by Godwin Ifeanyi Emefiele, strongly believed that it would be an instant hit with Nigerians. What Emefiele and then-president Muhammadu Buhari did not take into account was Nigeria’s inseparable relationship with physical cash. Even with the proliferation of mobile banking service providers, there is still an overwhelming dependence on cash for payments. The commercial bus driver agrees, the same as the iced fish seller in the market. Street traders are yet to disagree, too.
Furthermore, the huge knowledge gap in the country makes adoption increasingly difficult to scale. It took the average retailer a bone-crushing cash scarcity early this year to become more receptive to electronic transfers as a mode of payment. Even though eNaira has been integrated into bank applications and even publicised on various platforms, including schools, adoption has been slow. In a paper published in May 2022 by the International Monetary Fund (IMF), the public eNaira adoption rate was described as “disappointingly low”. However, the IMF did note that it was too early to release a scorecard for Africa’s first Central Bank-backed Digital currency (CBDC).
Another reason why implementing blockchain technology in Africa may be difficult is political instability. Many years ago, the only way I knew about military coups was through my Government and History textbooks. However, we are witnessing a recurrence of coups on the continent, particularly in West Africa. In the last four years, the region has suffered seven coups, with the most recent occurring in Niger on July 26, 2023. This is a terrible trend given the military’s tendency to suspend the constitution and disregard most of the policies made by civilian rulers. So if blockchain was adopted in Niger, for example, the military could consider spending public usage of the system. Change in governments via elections may not be helpful to long-term blockchain adoption as politicians have diverse ideologies. But as blockchain is still in the early stages and yet to be valued by the majority of the political class, a new ruler can usher in a different policy that can undo its usage.
Blockchain has a long way to go in Africa and the rest of the world before it can gain massive adoption in the ways inventions like the internet and smartphones have. The knowledge gap coupled with digital illiteracy is heavily prevalent in regions like Africa. That is why early blockchain-driven projects like the eNaira will likely struggle for engagement for a few more years. Although digital currency is yet to become a top choice for transactions among citizens (including this writer), it is still an ambitious project whose fortunes could change in the near future.
Michael Akuchie is a tech journalist with four years of experience covering cybersecurity, AI, automotive trends, and startups. He reads human-angle stories in his spare time. He’s on X (fka Twitter) as @Michael_Akuchie & michael_akuchie on Instagram.
Cover Photo: Nft Now