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Why there is a rush for bitcoins in Zimbabwe

by Staff reporter
29 Oct 2017 at 07:18hrs | Views
APPLE Inc co-founder Steve Wozniak recently declared that bitcoin is "better than gold and the United States dollar".

Wozniak even went a step further to compare having a bitcoin to owning a house due to its surge in value.

Bill Gates, the world's richest man and Microsoft co-founder three years ago also described the bitcoin as "better than a currency".

The world's crypto market cap stands at $170 billion, with analysts predicting it to hit $2 trillion in the coming years.
The bitcoin's value against the dollar had grown 239,46% to $5 896,21 per bitcoin as of Friday from a May 14 figure of $1 736,91 when Standardbusiness first uncovered a small, but vibrant bitcoin community in Zimbabwe.

This has triggered an interest from locals.

"In general, Zimbabweans could have bought bitcoins in various ways, which makes it difficult to know the trend at the broad local level.

"With regards to trades on Golix, kindly refer to our homepage for the monthly and daily statistics.

"The general trend shows an increase in interest in the bitcoin," said Yeukai Kusangaya who co-ordinates trades at the Golix bitcoin exchange.

"It is not necessary to have cash to buy bitcoin. Most people just use the generally available electronic means.

"As such, the buying of bitcoin is not affected by the prevailing cash shortages… in the event that a seller wants cash for bitcoin, they will have to identify such a buyer with cash on their own and do a peer to peer trade."

While most locals are involved in the bitcoin trade through what is known as bitcoin mining, a process of adding transaction records to bitcoin's public ledger of transactions or blockchain done in a singular network, bitcoin trading has risen.

In Zimbabwe, the most common bitcoin exchanges are Golix and Spectrocoin. Golix was formerly Bitfundi under start-up company Bitfinance Zimbabwe

"Over time, however, the interest [in bitcoin] has been increasing. It is important to note that this is normal upward-growth trajectory of most innovations," Kusangaya said.

On why locals were becoming more interested apart from the obvious rise in value of bitcoin, Kusangaya said the reasons generally varied from person to person, and with its use.

"Some use it to pay for services provided outside the country, such as software," she said.

"For example, a local software engineer developing an app can use bitcoin to pay for necessary software tools. Others use bitcoin to say, import a car they can use to run a small business.

"The good news with using bitcoin for such purposes is that no foreign currency leaves the country, unlike a situation where the same person was to ask their bank to do a telegraphic transfer.

"This reduces the country's pressure on nostro balances."

Kusangaya said it was impossible to know the number of local bitcoin users because bitcoin was essentially a peer to peer instrument run by a block chain — a decentralised ledger, meaning that the cryptocurrency operates in a very secure system.

Spectrocoin did not respond to enquiries made last week.

To use bitcoin for either buying or selling, individuals have to first create a bitcoin wallet where they intend to keep bitcoins.

These wallets are on a blockchain, which is used to record transactions across many computers and used for cryptocurrency transactions due to the level of security associated with them.

Once the wallet has been created, the person proceeds to register on a crypto currency exchange or in the case of bitcoins, a "bitcoin exchange".

On the exchange, a person must provide personal details similar to that of opening a bank account in order to start buying and selling.

Once the process has been approved, a person can start buying or selling and placing the bitcoins in the wallet.

However, people have to buy or sell bitcoin on a local exchange or send the bitcoin from their wallets to another user to do it for them outside the country.

Bitcoins have surpassed other investment alternatives such as gold. According to United States Apmex Inc, the world's largest online retailer of precious metals, the price of gold per ounce was $1 269,4 on Friday from $1 229,58 as at May 12.

What is driving the growth of bitcoin?

Founder of South Africa-based Liquid Crypto-Money, Shireen Ramjoo said it was due to more countries regulating the crypto-currency.

"More countries have regulated bitcoin and as a result, more people are starting to use it," she said.

"As more regulations happen worldwide, it creates opportunity for bitcoin to become more ingrained in our societies. Germany, Switzerland, Japan, South Korea, Hong Kong, Philippines as well as recently Australia have regulated it," she said.

"Russia, Malta, India and Malaysia are some of the few who have set their eye on creating regulatory frameworks as well for cryptocurrencies by 2018."

She said the growth in the value of bitcoin could also be explained by "forks" which is a change in the software of digital currency that creates two separate versions of the blockchain with a shared history.

Due to forks creating more versions of these blockchains, thus securing a bitcoin network, free bitcoin cash is created but at a much lesser value than the actual bitcoin.

"In August we saw bitcoin cash fork, and recently bitcoin gold. We anticipate the third fork on bitcoin to happen in November. Usually before such forks happen, there is a rush of people buying into bitcoin that will increase the value as people are trying to accumulate "free-coins".

"You automatically get the same equivalent of the new coin as a result."

On the Golix Exchange, the bitcoin is trading significantly higher than the global prices at about $9 800 for one bitcoin on Friday but that is due to the billions of dollars in real time gross settlement (RTGS) balances.

However, despite the value being more locally, outside bitcoin users have remained sceptical as the RTGS balances themselves are not backed by anything.

Bitcoin is one of 800 cryptocurrencies in use.

In May, central bank governor John Mangudya warned against the usage of bitcoin due to the high levels of externalisation, laundering of money and financial cybercrimes.

Source - the standard