Kathy Gibson at AfricaCom, Cape Town – Bitcoin has generated a lot of international press over the last few months, but so far the system has not really gained traction in Africa.
Pelle Braendgaard, co-founder of Kipochi, believes that Bitcoin is a truly disruptive technology that could create new opportunities in Africa.
He explains that Bitcoin is a currency, like any national currency, that floats independently.
The most important part of the Bitcoin system is that any user with an online wallet can create a Bitcoin account. “You don’t have to see anyone, you just create the account using a wallet,” Braendgaard says.
“It is a system completely without gatekeepers, without people wanting to know who you are, without credit limits and without contracts.”
The reason it is able to do this, he adds, is the Blockchain technology, which is a public ledger of transaction. “Every Bitcoin transaction is completely public and is immediately audited by hundreds of thousands of computers.”
Braendgaard likens it to the early days of the Internet. “Used to be that if you wanted to connect your network to another network, you had to have a leased line. That’s how it works now for payment systems. With Bitcoin you don’t have to do that: you just send the money on to the Bitcoin network and the receiver on the other side simply takes it down and uses it.”
Mobile money systems in particular suffer from being isolated, he adds. “Mobile money systems today are generally islands, tiny eco-systems of users, sometimes including merchants or services. They tend to operate only in one geographic region, generally under the control of one operator. But there are no bridges and no way of getting off the island.
“Some operators have been very successful. But for payment systems you really need critical mass, or the network effect, with lots of different people on one system. Generally, if there are a number of small islands in one country, none of them will take off; and if there is one big operator, then any others that try to enter the market will fail.”
Bitcoin helps to solve this problem, Braendgaard says. “With Bitcoin it is easy to go in and create links. By integrating into Bitcoin, mobile money systems can take advantage of the network effect.”
Braendgaard stresses that he doesn’t see Bitcoin as an investment or speculation platform, but recommends it as a way of facilitating payments.
“There is a $500-billion worldwide remittance market,” he says. “One of the first disruptive things that Bitcoin will do in Africa is in the remittance market.”
By making use of a Bitcoin exchange, it become easy and transparent to transfer funds, he says. The sender simply transfers money to an exchange to gets Bitcoins loaded on to his wallet in return, These are sent to the receiver who can either exchange them for funds or use them to purchase goods or services.