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Africa-wide cryptocurrency adoption requires decentralised model

There are many advantages to cryptocurrencies, but socioeconomic factors must be considered before it can be accepted as a mainstream alternative currency, says Heinrich Springhorn, business analyst at MobileData.


Johannesburg, 20 Jul 2017
Heinrich Springhorn, Business Analyst at MobileData
Heinrich Springhorn, Business Analyst at MobileData

While some sceptics may have misgivings about the technology, fuelled by isolated incidents involving alleged underhanded dealings, the fact is that cryptocurrency and blockchain have disrupted financial services and will be around for a lot longer.

This is the view of Heinrich Springhorn, Business Analyst at MobileData, a leading South African technology service provider focused on payment facilitation and prepaid electronic value distribution.

"There is some instability due to a hearing in Japan regarding a Bitcoin exchange that was shut down due to suspected embezzlement. However, this does not take away from the potential of what cryptocurrency, and essentially the blockchain, can mean to transacting worldwide," says Springhorn.

And this realisation can make a real difference for operations in Africa. MobileData's standpoint is that to apply this methodology in Africa and transact more freely, companies must be willing to participate in a decentralised model of transacting.

"One of the biggest setbacks at the moment is that there are only a small number of stock and service providers worldwide that accept cryptocurrency such as Bitcoin, and it is still far away from becoming mainstream.

"If a cryptocurrency should become mainstream, the potential exists that it could cause instability in financial enterprises. The reason for this is that the banking institutions will lose their locus of control over currencies and consumers will transact outside of their control," says Springhorn.

The decentralised nature of cryptocurrency means the reality facing markets is that there is no intermediary with the power to limit any fraud or embezzlement. "This means there is no way for the assets to be seized in these cases," Springhorn explains.

The company's assessment of the market is that for widespread adoption of this model to occur in Africa, it will require a mechanism for on-the-fly exchanging of the cryptocurrency to a value of the fiat money. This is on the basis that services and stock providers do not accept cryptocurrencies as payment.

"If the service and stock providers do accept cryptocurrency as payment, then the transaction engine used will write an entry into the decentralised ledger and the transaction will go through the blockchain. Furthermore, there are socioeconomic concerns with regards to cryptocurrency, as many end-users do not have access to the technology needed to transact with cryptocurrency," Springhorn adds.

Breaking into the segment

Anyone with hardware and an Internet connection can 'mine cryptocurrency coins' and there may be those who believe entering this arena to exploit the technology and differentiate their services will be straightforward - but not so, says MobileData's analyst.

"Another reality of this growing financial services trend is the lack of trust by end-users, particularly in developing communities, in banking institutions and their preference for fiat money alternatives represents a challenge for those operators hoping to break into the cryptocurrency/blockchain market segment.

"This scenario represents a real challenge to break out into this market segment, over and above the technological requirements, which this segment simply does not have the infrastructure of and availability to use," says Springhorn.

MobileData's view is that branching out an organisation into cryptocurrency does seem to be the way of the future, though, as there is a steady rise for a want of decentralised transactions that can be utilised, especially in Africa, to send value across borders without the need of banking institutions.

"This will not only empower end-users, but also businesses to start to truly become global. There will be no need for banking institutions to transfer value to their nostro accounts and then onward on behalf of businesses, where the businesses will be able to just send value through the blockchain," Springhorn continues.

"There are many advantages to cryptocurrencies, such as Bitcoin; however there are still a lot of socioeconomic factors which need to be considered before this can be accepted as a mainstream alternative currency," he concludes.

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MobileData

MobileData is a proudly South African technology solutions provider targeting the prepaid mobile market and is positioned to assist mobile network operators (MNOs) in their quest to leverage off the next generation mobile communication growth.

MobileData is a company that enables fully managed, virtual product distribution and mobile transactional services for service providers that require prepaid product distribution and payment facilitation.

The company's flagship service delivery platform, TradeSwitch, enables customers across Africa to deliver reliable services to clients, irrespective of location, via the cloud. TradeSwitch is a secure, fully scalable, enterprise platform that delivers comprehensive virtual product delivery management and payment facilitation.

TradeSwitch is a merchant centric platform that enables multiple delivery channels for services providers, while enhancing subscriber and consumer experience by using the latest technology and smart services.

The philosophy behind TradeSwitch is all about bringing the consumer closer to the service provider by giving the service provider access to real-time insights and full control over their distribution chain using innovative geolocation-based technology.

This enterprise solution provides several core services, including full value chain integration of stakeholder systems, billing automation and business intelligence.

MobileData's focus is on the delivery of robust MNO-focused and value-added services and solutions to enhance the transactional systems of its customers.

As a premier national technology services provider, MobileData places a premium on service quality, innovation, integrity and passion that all form part of the MobileData value proposition.

Web: www.mobiledata.co.za
Facebook link: https://www.facebook.com/MobileDataSA

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