As the Financial Times’ hotly-anticipated webinar on Africa’s digital payment evolution concluded last Thursday, one final question from the audience underscored the essence of the event “how will digital payments help reduce poverty levels in Africa?”. Financial inclusion and deeper integration with the global economy have been the widely mooted dividends of the ongoing payment transformation for the continent’s 1 billion citizens. However, limited access to basic resources and cost-effective payments systems has significantly slowed this transformation.
Blockchain technology promises to bridge this divide and is already an important component of Africa’s digital payment landscape. As highlighted in a recent Chainalysis report, the African crypto market grew by more than 1200% in value received over the past year, with Nigeria, Kenya, Tanzania, and South Africa making the top 20 in the worldwide crypto adoption index. The continent’s traditional banking systems provide inadequate and uneven financial services to low-income citizens, contributing to the poverty premium, which excludes the region’s poorest from financial resources and growth. But how can blockchains confront this challenge?
Blockchains and the African economic landscape
Africa’s developmental challenges are centred on two core issues; promising economic growth and opportunity on the one hand and extreme poverty and inequality on the other. This chasm is what fuels and perpetuates some of the continent’s ills, impeding its capacity to break out of the poverty and dependency cycle. Every African country faces extreme disparity in wealth inequality, with the assets of the wealthiest 10% being 70 times greater than those of the poorest 40%.
In theory, blockchains can positively affect the continent’s inequality conundrum, but adoption in Africa has typically centred around crypto buy/sell activity. The continent’s emerging youthful population has been excited by both the relative ease of access to crypto markets and the market’s recent overall uptrend, sparking growing participation in crypto trading.
Pushback against widespread crypto trading
This crypto frenzy has had its critics. A widely discussed opinion piece on Coindesk accused some crypto projects of effectively pursuing “crypto-colonialism” in Africa. In essence, the argument is that blockchains cannot tackle poverty and the most pressing issues facing the continent. In February, the Nigerian Central Bank issued a ruling banning the country’s financial institutions from transacting with crypto exchanges, a pointed aim at the surging trading activity in the country.
While crypto trading can have its benefits and potential pitfalls, it does not acutely reflect the transformative potential of blockchain technology.
Alternative blockchain impacts on inclusion and inequality
This week’s major blockchain news featured the partnership between Tingo and Cudos to tackle the poverty premium in Nigeria. The partnership enables Tingo (which already offers mobile payment services in Nigeria) to extend Cudos’ scalable compute services to its 10 million Nigerian customers. The service will allow subscribers to monetise spare compute capacities in a fully decentralised and egalitarian ecosystem, underscoring blockchain’s potential to improve access to financial resources, improve inclusion, and foster growth on a levelled playing field.
Whatever the merits of crypto trading, blockchain’s varied use-cases are already confronting poverty in Africa, and the Tingo-Cudos alliance is a timely reminder of the technology’s compelling promise for good.
You have a role to play
Everyone can contribute to our efforts towards improving financial inclusion in Africa and beyond. We need distributed data centres and service providers. Please reach out to us to discuss potential avenues of collaboration towards achieving this goal.
If you missed our latest announcements, here are some of the recent partnerships we are excited about.
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The Cudos Network is a layer 1 blockchain and layer 2 computation and oracle network designed to ensure decentralised, permission less access to high-performance computing at scale and enable scaling of computing resources to 100,000’s of nodes. Once bridged onto Ethereum, Algorand, Polkadot, and Cosmos, Cudos will enable scalable compute and Layer 2 Oracles on all of the bridged blockchains.