Bitcoin is the name for a new type of currency. It’s all-digital, it isn’t controlled by a central banking body, and as such it’s slowly gaining in popularity around the world as an alternative to notes, coins and credit cards. We ran a story a few weeks back where a local e-tailer, NicSocks.com started accepting Bitcoins in exchange for goods in an effort to broaden the payment options for its customers, so some South Africans, at least, are embracing a digital future that includes a new kind of currency.
Since it’s a whole lot easier to let the Bitcoin people tell you what it is, and how it works, here’s a video that tells you a lot of what you need to know:
So, what you’ve just learned is that Bitcoin:
Can be transferred from person to person without the intervention – or fees – of a middle man.
Bitcoins are produced through Bitcoin miners
The number of Bitcoins is finite and predictable
Most importantly, and one of the reasons behind the controversy that dogs the currency is that using Bitcoins is completely anonymous, and thus an attractive mechanism for use by criminal and terrorism-affiliated organisations. At least, that’s what banks and governments say.
Proving the point of Bitcoin’s potential for mis-use (and the complete anonymity it affords its users) is that it is the primary means of payment on Silk Road, the underground online black market where anything from weapons to drugs can be bought and sold. Don’t worry, that’s a Wikipedia link, not a link directly to Silk Road itself.
Something else that video didn’t cover is the security of the system. Because of the way it has been set up, it’s quite literally impossible to create fake Bitcoins, as every Bitcoin transaction is completely visible to the entire Bitcoin network. Every time someone pays with Bitcoins, it is the equivalent of paying with paper money but having each note’s serial number scrutinised and compared against a database of all legitimate bank notes to ensure its validity before the transaction is authorised.
The long-term success of the currency hinges off the number of businesses willing to accept it as a form of payment, and on that count Bitcoin is making good progress. Not here in South Africa (yet), but certainly in Europe and the US, where enough companies are providing it as a payment option that successful experiments have been performed with journalists surviving by using it as their only means of payment for a week.
So, finally, I come to reasons I think that yes, a digital currency like Bitcoin could work in South Africa. Firstly, it does not require that users have a bank account. Secondly, if you have a smartphone and internet access, you’re set up to use Bitcoin, and South Africa has a very healthy 102.69 phones per 100 people according to Indexmundi.com. A large portion of those phones are internet-capable, so technology isn’t an obstacle.
Third, we have a strong history of entrepreneurship, and enabling more people to forge their own way by using a universally-available digital currency can only be a good thing. The only thing we’re lacking at the present moment is a large number of businesses that accept Bitcoins as payment, and as it’s starting to catch on overseas, chances are that the same will happen here over time as more merchants and service providers become aware of its benefits.
Lastly, South Africa already has a Bitcoin exchange called BitX, so South Africans can already exchange Rands for Bitcoins without going to an overseas provider. Clearly, there are people here who see the value of going digital.
If you’re interested in participating in the Bitcoin economy, or you want more information directly from the horse’s mouth, head on over to Bitcoin.org. If you’re a small business and you’d like to find out how to go about accepting Bitcoins, check out Bitcoin’s helpful Wiki page on the subject.