Cryptocurrency: more education, less hype

How did you originally get interested in the blockchain?

My interest in the blockchain began with a news report on Al Jazeera in late 2014. That was the first time I had heard about the technology and what’s behind it. It was around that time that I also learned about somebody who had bought 5,000 bitcoins at less than a dollar each, so he’s about US$5 million richer now. Naturally that got me curious and I wanted to see what this is all about. So that’s how I got involved in the bitcoin and the blockchain space. I started out by blogging about it. I wrote for a bitcoin exchange and for a number of bitcoin news websites. And from there I never looked back. I also started coding blockchains: I got a book and tried to see if I could code blockchain on my own. So I started to find ways of immersing myself more in the technology.

You are co-founder of a company called PayHub. Did that emerge from your interest in blockchain technology?

Yes, actually it was a convergence. The original founder of PayHub Solutions, headquartered in France, has been involved in the fintech space for quite some time. So when we started chatting and I told him about my interest in the blockchain, we agreed that this was probably a technology that was worth watching, especially in view of the fairly poor financial systems in Africa. We thought it would be a good idea to see what we can do with it. We started by wanting to enable financial inclusion on the African continent.

Many people immediately think of bitcoin when they hear the word blockchain. How did the bitcoin come about?

The founder of bitcoin, Satoshi Nakamoto, wrote a white paper back in 2008. In it he explains the idea behind blockchain technology and what it’s designed to do. It’s more or less a consensus mechanism that bypasses the traditional third party that acts as a go-between in financial transactions. So I understood it from that perspective. Especially in the wake of the financial crisis the world was going through, I understood that blockchain was designed to solve that problem by ensuring that transactions are done by consensus and in a very transparent, open and public way.

That was an interesting approach. I personally don’t have any political agenda as to why I got involved in the blockchain, but I did see it as a solution to many of the problems that we’re encountering, for example sending money on the African continent. It’s expensive to send money here: until very recently the charges and transaction fees could amount to as much as US$10-US$15 per transaction. The bitcoin and the blockchain seem to be making that easier for those of us who don’t live in our country of origin. So it’s from that angle that I – and many others – got interested in the bitcoin and what it can do.

Banks have been reluctant to accept cryptocurrency, fearing it almost, though some seem to be embracing it now. What are your thoughts on the establishment’s role in blockchain technology?

I frankly don’t see where the fear comes from with banks. Let’s understand one thing: the whole cryptospace is not going anywhere. You cannot undo the idea, it’s already out there. And you cannot deny that the cryptospace will also need some kind of regulation. I think both parties will have to meet somewhere in the middle. And here I’m not only including the central banks but I also have in mind commodity trading commissions and regulators. And that is because bitcoin and other cryptocurrencies have a dual nature. They can function as currencies and they can also function as commodities. Now what we need in the industry are rules. The ones who are best placed to make those rules basically are the central banks. So I don’t really see a situation where banks need to be unduly worried.

I’ll give you another example from my home country. When m-pesa was launched, the banks in Kenya were similarly reluctant to embrace it. But the central banks decided to give this new technology space to see what it can do. Ultimately, it managed to address the enduring problem of financial inclusion. Before m-pesa only about 20% of Kenyans had bank accounts. After m-pesa that percentage must have risen to 70 or even higher. So m-pesa solved a problem that banks were not able to solve by themselves.

It’s always my view that technology is judged by its ability to solve a problem. The fact that the cryptospace is growing so quickly does demonstrate that there must have been something in the market that it’s responding to or that people are responding to. So I see them as being complementary.

Now the blockchain is becoming more accepted and known, people are looking for other ways to use it. What do you believe is its potential in the agriculture sector, for example?

Personally, I am working on a project in agriculture, and what I’m trying to do is explore the possibility of the blockchain being used to improve the agricultural value chain in Africa. Right now, about 30%-40% of harvests in African agriculture are lost. And that’s mostly because of inefficient value chain systems. So when it comes to things like being able to move commodities from one place to another there is quite a bit of loss. The problem is that a lot of the information that you need to make those decisions and improve the value chain is held up in companies and what you generally call information silos. Access to this information is very limited though.

So one of the projects that I’m working on would enable all the players in a value chain to be able to pull their data together onto a blockchain which can then be used to track the movement of commodities across the entire value chain. Of course that involves quite a number of actors and different kinds of technology. But that’s how I see the blockchain being used: to improve efficiency.

What challenges are facing cryptocurrencies? Some people are concerned about their apparent volatility.

What I’ve noticed about cryptocurrencies is that there’s a lot of exuberance and very little education. Right now most of the people who are getting into this space or who want to invest in bitcoins are doing so because they think they can make a lot of money. Very few people I meet are able to really have a discussion on what it is that drives bitcoin and its underlying technology. In fact, few people are interested in having that conversation. In their minds it’s all about how to make money.

This actually gives the technology a bad name. The volatility in my view is the function of the lack of two things. A flexible and accommodating public policy. And second, an educated consumer. If we had educated consumers who are aware of what it means to put their money into bitcoin, then we would have a much more stable currency.

But I see this technology as something that can solve a lot of problems in Africa. That’s what we at PayHub are trying to do in East Africa, to offer solutions that are practical and relevant to where we live. So my only wish is that we had more education and less hype. It’s especially important that we look at other ways of using the blockchain, such as in agriculture. I see a situation soon where there will be a convergence between cryptocurrency, artificial intelligence and 3D printing to create whole new solutions and products that maybe right now we cannot conceive. But for that to happen we need the enabling environment, an environment where people are educated, where people are skilled, where people are trained, and where we have government policies that aid rather than interfere with the technology.