How have Cryptocurrencies been adopted in Nigeria?


Thursday, January 18, 2018 /5:50 PM /Greenwich Trust 

About Cryptocurrencies
A Cryptocurrency is a decentralized digital asset designed to work as a peer-to peer transaction version of electronic cash that allows for users to make payments to one another without the need of a third party financial institution. With the help of cryptography and Blockchain, a decentralized public ledger system called Blockchain is used, in which all transactions are publicly announced, these technologies ensure there is no need for banks or third party financial institutions on Cryptocurrency systems. The pioneer cryptocurrencies are Bitcoin, Etherum, litecoin and OTA. 

Cryptocurrencies are a generally a peer-to peer (P2P) payment systems used for transactions without the need of third party financial institutions. For this to be achievable a public ledger system that records and announces all transactions is required, all information for transactions is recorded on a block (timestamp, hash key, sender keys , receive public keys. All this information constitutes what is called a block. A blockchain is a series of blocks . An existing block cannot be edited without previously editing the blocks before it, mak-ing it difficult for the system to be rigged.

Each user must have an encrypted electronic wallet, with each wallet holding a private key as identification rather than personal information which is currently used in traditional online banking. When users send cryptocurrencies on a network, the sender sends this information from their encrypted private key to the receivers public key.

The price and value of a cryptocurrencies is generally determined by the demand of said Cryptocurrency , as supply is usually finite.

The price of any particular cryptocurrency is also determined and by the innovation or problem that cryptocurrency was created to solve. For instance, cryptocurrencies which are very similar to the pioneer cryptocurrency Bitcoin, and that do not offer significant upgrades would generally be less valuable than a cryptocurrency like Litecoiin. Litecioin was based on the idea of Bitcoin but built with a bigger block size to ensure for greater transaction speeds and bigger blocks to store more information.

There are various Cryptocurrencies, most with their own unique characteristics

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How have Cryptocurrencies been adopted in Nigeria?
Bitcoin the pioneer Cryptocurrency was created in 2008 by a scientist by the Japanese pseudonym Satoshi Nakamoto.

In Nigeria, adoption of cryptocurrencies has risen over the past two years with trading reaching $1.3 million in February 2017; this figure is relatively small in comparison to global figures. A number of local exchanges have opened for local customers to trade various cryptocurrencies. there is generally still an air of uncertainty concerning local investors concerning cryptocurrencies.

Merits of using Cryptocurrencies

Reduced reliance on third party financial institutions, and transaction system based on trust/proof
Cryptocurrencies such as Bitcoin, lite coin etc. are designed to reduce reliance on third party financial institu-tions for transactions. In our traditional banking system a third party financial institution is required to act as some form of escrow for online transactions to take place. A public ledger sys-tem records transactions and these transactions are publicly announced and verified on the public ledger, each transaction has an timestamp (used to prove the time of transaction) and a hash key. The public and private keys along with blockchain serve as proof that a transaction has taken place; this solves the trust issue in our current online banking system, where third party banking institutions are heavily relied on for online trans-actions. 

Anonymity for payment
Most Cryptocurrencies ensure anonymity of payments to it users and requires just the user’s private and public keys for transactions rather than full personal details required by third party financial institutions, 

Transaction speeds
One of the key benefits of using cryptocurrencies for transactions is the speed of transactions. Transaction speeds are quicker using cryptocurrencies taking usually 10-45 minutes from the senders wallet to the receivers wallet to anywhere in the world. 

Lower Transaction Cost
Transaction costs for cryptocurrencies are usually lower than in the traditional banking space. These lower transaction costs has seen cryptocurrencies gain prominence as growing alternative for international transfers rather than the traditional and expensive method traditional banking offers. 

Inflationary Control
Because most cryptocurrencies are finite in quantity , adoption of cryptocurrencies is a method of payment in high inflationary environments has been touted as a possible merit for adopting cryptocurrencies. Venezuela recently announced plans to adopt an oil based back cryptocurrency whilst the use of cryptocurrencies such as Bitcoin and Etherum has been consistently rising in Zimbabwe for years. 

Fund raising for startups
Starts-ups have used the idea of initial coin offerings to raise capital for projects over the past few years, this is very similar to the way an IPO works but rather than investors are paid in cash and dividend, they receive returns in an alt coin backed by the project. This enables start-ups to bypass the rigorous process associated with venture capitalism and fund raising. 

Warnings of Investing in Mutual Funds

·    Unlike listed securities, the cryptocurrency market is deregulated and not under the jurisdiction of SEC. 

·     Cryptocurrencies are known to be volatile in nature and are too risky to be to be considered a store or measure of value 

Cryptocurrencies use as a medium of exchange in Nigeria is still limited as very few vendors accept cryptocurrencies as a method

In Conclusion
, an investor or speculator looking to Cryptocurrencies, the risks of volatility and returns have to be weighed before keeping money in such investment vehicles. However, the value of each cryptocurrencies is based on demand for currencies at a given time, tied with acceptance and innovation. As there isn't any intrinsic value backing the value of Cryptocurrencies.

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