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Technology

Forum brings home hopes, fears of rising digital currencies

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Facebook recently announced plans to launch a new digital currency to be known as Libra. PHOTO | AFP 

When Facebook announced plans for its Libra cryptocurrency last June, the debate on the impact of digital currencies on the global financial systems took a hotter turn. Before Libra’s announcement, Bitcoin had already stirred the world with its ebbing and flow of its fortunes even as concerns about its security linger.

The discourse has now shifted to how competition between two major pioneering digital currencies will shape up. Already this discussion is being had in Kenya, with techies last Friday holding an event titled Libra vs Bitcoin, The Fight of the Century at Four Points, Hurlingham, Nairobi.

The experts said the major point of departure between the two is that while Libra is controlled by powerful global companies, Bitcoin runs on a decentralised blockchain that no single individual or entity can control.

“To own a stake in Libra, you must pay a membership fee of Sh1 billion, but Bitcoin can be owned in fractions with as little as Sh100,” said Bithub Africa’s chief executive John Karanja.

While Bitcoin price is not dependent on any single government just like the case with fiat currencies, Libra’s is tied to powerful global currencies and financial assets.

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“But governments no longer enjoy monopoly on money issuance (printing) and this creates a missing link in attaining a single global money system. The world has realised that decentralised networks are hard to stop,” Mr Karanja said, noting that Kenyans must not be afraid of financial disruption but should rather confront it head-on.

There are only 21 million Bitcoins available for digital cash flow but Libra’s supply is controlled by demand. When a user exchanges dollars for Libra, new corresponding assets are created. When they pay or cash out, those tokens are destroyed.

It also emerged that while Bitcoin is “permissionless”, Libra is based on a relatively centralised blockchain governed by the Libra Association. This means that with Libra, only those authorised will be able to add transactions to the ledger; and the majority of Libra's founding members are big technology and financial companies.

“Bitcoin is like a market commodity such as gold where buying it immediately gives you value, but Libra’s value depends on what fiat currency backs it and can only be used in peer-to-peer transactions if approved by these backers,” noted Mr Karanja.

Introduction of Libra has also raised further queries about data privacy. Facebook has on several occasions been accused of revealing personal user data, and there are serious concerns by Kenyans that the social media giant could leverage Libra purchases and transactions to deepen its revenue from selling personal user data. Bitcoin’s lack of a centralised point of oversight makes it relatively easy to trust.

Libra is still a prototype, expected to be launched in 2020, and a section of tech financial experts say this could either make or break Bitcoin. Miners will be expected to temporarily hoard their Bitcoins rather than selling, to help inflate the value and make the process profitable again.

In the digital coin exchange market, it was established at the event that at least Sh900 million are lost through online scams, with some Kenyans falling prey to such fraudsters.

“When I was new to cryptocurrency trade, I lost my first investment in Bitcoin to a fraudster. But now there are many ways to avoid scams as there has been a lot of research published on blockchain and cryptocurrencies today,” said Blockchain Association of Kenya’s chairperson Roseline Gicira, adding that Kenyans have no excuse for not getting involved in the field.

During the three-hour deliberations on Libra Vs Bitcoin, participants were guided through a new technology developed by Bithub Africa to trace and identify suspicious coins, as there are thousands of digital coins in the crypto world, and previous mechanisms of detecting a worthless coin have been overtaken by time.

“People lack guidance. Cointest is a platform for all traders that uses a new algorithm to validate cryptos on a daily basis. We use more accurate parameters such as productivity, nature of bugs, commits or changes, frequency of versions and forks which denote the amount of market interest,” explained Simon Mugo, one of the developers of the platform.

Although it has several similarities to Coin Market Cap, it has better public repositories, he assured Kenyans, but warned that “If you invest in a coin that ranks low on productivity, you will definitely lose your money.”

Code Mashinani’s chief executive Mr Jesse Muchai said Kenyans including children, above the age of seven, should be taught about cryptocurrencies and helped on how to think critically in a fluid tech ecosystem that keeps changing. Kesho Labs Blockchain educator Roselyne Wanjiru said the most critical part of Blockchain in Kenya’s economy is building a platform for the corporate world to fully understand the technology.

“Are we using cryptos because we have to, or are we using them because we must prepare for the future? Businesses need credible platforms to get in-depth explanation on the future of fintech,” she said.

Kenyans were also urged to share innovative ideas on the evolving technologies.

“Kenyans need to work together, network and share ideas about creativity and innovation. I am currently helping entrepreneurs access cheaper capital financing through Blockchain,” said Young Entrepreneurs Network Africa founder Kamau Nyabwengi.

The forum urged African States to aggressively tap technology to eradicate corruption, create more jobs and boost accountability. “Blockchain, Big Data and AI were created for Africa to solve its problems. If the continent does not make use of these technologies, it will be recolonised by the West and East using data,” said KuBitx’s Ghanaian chief executive Mr Eric Annan.

He emphasized that African tech developers must “learn fast” to believe in their craft and keep going no matter the stumbling blocks. “Silicon Valley will never tell you the number of technology projects that failed, they will always thump their chests about those that came to fruition. We must learn to fall, learn our mistakes and stand again.

“Nobody will come from their continent to build Africa for us. We must avoid the temptation of start-up acquisitions by multinationals and only accept collaborations,” he said and added that tech developers should create value first as money is always a byproduct of a work well done.

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