Proliferation of cryptocurrencies: which currencies should you invest in?

Most people in the banking world today are familiar with the term blockchain. The first thing that springs to mind when blockchain is mentioned is Bitcoin. It is the cryptocurrency and digital payment system created by the mysterious Satoshi Nakamoto, which has grown exponentially since its inception in 2009.

Most people in the banking world today are familiar with the term blockchain. The first thing that springs to mind when blockchain is mentioned is Bitcoin. It is the cryptocurrency and digital payment system created by the mysterious Satoshi Nakamoto, which has grown exponentially since its inception in 2009.

https://coinmarketcap.com/currencies/bitcoin/#charts

The value of Bitcoin has grown from around USD 2/Bitcoin in December 2011 to above USD 2,300/Bitcoin this year. Investment in Bitcoin sky-rocketed after a surge in traded volumes and increased Bitcoin prices in the Asian Market.

Investors are opening up Bitcoin wallets in the fear of missing out. As investors rush to ride the wave, not only has investment in Bitcoin spiked, but so too has the investment in “altcoins” (the cryptocurrency alternatives to Bitcoin). Some of the largest and most dominant of these are, inter alia, Litecoin, Ethereum, Ripple and Monero. Each cryptocurrency offers something different, and if deciding to invest in these long-term, it would only be prudent to understand more about what they do.

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Let’s start with the world’s leading cryptocurrency, Bitcoin. In addition to boosting financial inclusion, Bitcoin aims to make near real-time cross-border transactions possible on a global scale. In South Africa there are already online merchants that are accepting Bitcoin payments. Some of them are well known brands: BidorBuy, Takealot, Superbalist, Runwaysale, Raru and Appliance Online. Additionally, all merchants on the payfast.co.za platform (30 000 websites), accept Bitcoin.

Ethereum differs slightly from Bitcoin, with more focus on technical blockchain development. It is an open source platform used to build decentralised applications. Examples of Ethereum applications include self-executing smart contracts and native tokens. A number of interesting developments on the Ethereum blockchain are emerging. WeiFund, a crowdfunding solution, operates similarly to conventional crowdfunding platforms such as GoFundMe and Kickstarter. However, instead of using fiat currency, WeiFund raises funds using the Ether cryptocurrency. Users can contribute and manage crowdfunding campaigns with the use of smart contracts to turn donations into complex agreements.

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Litecoin was created by Charles Lee, a former engineer at Google, with the intention of becoming the second most valuable cryptocurrency. When it was written, it was the second biggest cryptocurrency by market capitalization, but has since fallen to the 6th largest as it has yet to see much more investment. Litecoin is similar to the Bitcoin. The main difference is that it takes an average of two and a half minutes to generate a block, contrast to an average of ten minutes that Bitcoin takes to generate a block. This means that Litecoin can confirm transactions at a faster speed than Bitcoin. However, it is important to note that transactions occur instantly, whilst confirmation of transactions occur as the blockchain propagates.

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Monero is attempting to take on Bitcoin by providing greater transaction anonymity. Bitcoin is known for supporting anonymous transactions; however, each transaction has a sender, receiver and amount recorded on the blockchain. Each wallet has an address which can be traced back to the owner through IP addresses and service providers. To combat this, Monero makes use of a ring signature to provide for more privacy.

Ripple’s digital currency XRP is similar to Bitcoin as they are both digital currencies that can be mined and sent from peer-to-peer without an intermediary. Ripple is used as a currency agnostic value exchange. It is a real-time gross settlement system enabling real-time global payments anywhere in the world. The advantage of this is that it can be in any form of currency (Dollars, Yen, Euros, etc.). Ripple enables secure, instant and inexpensive global financial transactions and may assist Bitcoin in accessing the rest of the financial world.

There are over 700 different cryptocurrencies currently in issue which opens up a broad investment base. Hopefully some of these points spark your interest to delve deeper into each cryptocurrency’s ambition and that the summary above has given you a starting point for further research.

by Matthew Shaw

Kenya’s mobile money story: the runaway success of M-Pesa

Development finance and corporate banks alike have long wrestled with the issue of banking the unbanked in the developing world, which would encourage broad-based socio-economic development on the one hand, as well as greater product distribution for the private sector banking institutions.

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Image credit: http://martinpasquier.com

Development finance and corporate banks alike have long wrestled with the issue of banking the unbanked in the developing world, which would encourage broad-based socio-economic development on the one hand, as well as greater product distribution for the private sector banking institutions.

However, bringing greater financial inclusion to the bottom of the pyramid no longer means universal branch bank account ownership. Nowhere is this more evident than in Africa, particularly in one of the continent’s emerging fintech hubs, Kenya.

http://asmarterplanet.com/blog/2011/04/kenya-leapfrogs-the-rest-of-the-world-with-its-mobile-money-services.html
Image credit: http://asmarterplanet.com

In 2006, before M-Pesa was launched, 25% of Kenyans had access to banking products. By 2014, this figure had jumped to 68%. Almost half of these users do not have a formal bank account, indeed, formal banking sector inclusion in Kenya remains as low as 23%. However, the M-Pesa platform performs the essential financial transactions:  deposit and withdraw money, transfer money to other M-Pesa users and non-users, pay bills and purchase airtime. M-Pesa agents are as ubiquitous as pavement airtime kiosks, whose owners have been duly trained and are incentivised by clipping a commission per M-Pesa transaction. This is the kind of distribution network that most ATM-driven banks can only dream about.

This context is not unique to Kenya. Small wonder then that Sub-Saharan Africa is a global leader in the use of mobile money technology. On average 16% of the adult population actively uses a mobile money product in the region; the global average is 2%. Of the 18 countries in the world that have more mobile money accounts than bank accounts, only one, Paraguay, is not in Africa.

The significance of M-Pesa and the mobile money products like it is the potential it holds for retail financial access in the developing world and the money to be made in doing so. As the trail-blazer in this innovation space, Safaricom now generates a reported 10% of its revenue through providing a transactional banking platform for that segment of the population conventional financial institutions did not consider worth it to bank.

[Reprinted with permission from Observer Research Foundation].

by Lucy Corkin

 

Read the full story originally published by Observer Research Foundation website here.

 

The Observer Research Foundation is India’s leading policy think-tank seeking to lead and aid policy thinking towards building a strong and prosperous India in a fair and equitable world. ORF has the mandate to conduct in-depth research, provide inclusive platforms and invest in tomorrow’s thought leaders today.

lucy-corkin-rmb1-cropped2Lucy Corkin is Business Manager at RMB Africa, having joined RMB as a Class Of in 2012. She has a PhD in International Relations from SOAS, University of London, and has picked up a couple of languages along the way, including French, Portuguese and Mandarin Chinese. She is a regular contributor for the Observer Research Foundation where she gets to share her thoughts on goings on in Africa, the world of banking, and anything else that grabs her attention.