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Bitcoin And Crypto Scam: Why Africansʼ Skepticism Is Justified

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Bitcoin

Cryptocurrencies, since their launch in 2009, have not had an easy route in the monetary world. The digital currency sent gradually beginning to gain its ground as it is slowly becoming a popular form of payment in most places around the globe.

Recently, there has been a steady growth of interest as most countries are beginning to recognize its prospects. On the other hand, some African countries are still very doubtful when it comes to crypto as they seem to believe this form of currency is, in itself, a scam.

African Skepticism Towards Crypto

Over the years, crypto has been praised as well as criticized. To some, crypto holds to the key to the future but in some parts of Africa, the digital currency has never been short of controversy. And rightly so.

It is no secret that Africa is a hotbed for crypto scams. On many occasions, Africans have been targeted and exploited with the idea of investment opportunities which often promise exceptional results within a short time.

These claims usually prove to be false as the swindlers have always disappeared after having conned so many unsuspecting people of their savings. Some of the worst crypto scams to have hit the African continent include Bitcoin lottery scam, Bitcoin global, and MMM Bitcoin amongst a host of others.

The high rate of bitcoin scams has resulted in Africans losing trust in digital currencies and has ultimately contributed to the slow rate of Bitcoin adoption in some regions of the continent.

Many African countries have expressed negative sentiments concerning the use of crypto and have discouraged its use. In Kenya, for instance, the Central Bank of Kenya has been totally unsupportive of cryptocurrencies and has rejected its use, due to “their unregulated nature”.

Also, other African countries such as Uganda, Botswana, Nigeria, and Tanzania, to mention a few, have expressed skepticism towards the integration of the digital currency. One collective reason for this lack of cooperation is due to its decentralized structure.

Crypto’s Decentralization

Cryptocurrency is a digital currency designed as a medium of exchange. Most cryptocurrencies are decentralized networks that run on a distributed public ledger known as the blockchain. Bitcoin is the first decentralized cryptocurrency.

Unlike any other currency, Bitcoin facilitates a peer-to-peer instant exchange. Bitcoin gives you total possession and control of your wallet without you having to go through a third party (no identifying information is needed to start a Bitcoin account).

Whilst this decentralized structure is the feature that makes cryptocurrencies trustworthy, the exact feature has also constituted the major source of attraction for scammers.

Why Bitcoin Is A Choice For Scammers

Bitcoin scam

Bitcoin, just like most other cryptocurrencies, is a digital currency that operates independently, without any supervision from the government.

While its independent nature has triggered numerous advantages, this same feature makes it prone to all sorts of risks. Sitting comfortably on the top of this list is crypto fraud.

Any bitcoin user can easily rely on digital signatures and the public history of transactions stored on the blockchain, to prove ownership.

Because of its anonymous nature, Bitcoin is increasingly used in scams. There are dozens of different types of crypto scams ranging from giveaway to sextortion, fake exchanges, fake ICOs, bitcoin recovery, Ponzi schemes, video scams, and so on.

July 15th, 2020 recorded one of the greatest crypto scams of all time. Hackers were able to gain access to a good number of prominent Twitter accounts, for bitcoin giveaway fraud. They were able to get away after stealing over $100,000 worth of bitcoin.

Over the past 4 years, 38 million US dollars in bitcoin alone have been confirmed stolen by scammers.

How Can The Skepticism Be Reduced

For the reason discussed above, most African countries are reluctant to embrace or even accept the idea of cryptocurrency and the blockchain network. 

However, this skepticism can be reduced through the creation of decentralized but regulated platforms that are supported either by the government or other recognized bodies. 

On top of that, the government needs to come to the realization that crypto comes with advantages that can contribute to the growth of a country. The government needs to start setting up a regulatory framework that works well for crypto.

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Jack Dorsey‘s Square to develop open source Bitcoin mining

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Jack Dorsey Bitcoin

On Friday, October 15, Twitter CEO Jack Dorsey announced that American fintech company, Square, would be looking to get into Bitcoin mining. Jack Dorsey who is also Square’s CEO announced this on Twitter which subsequently sent waves through the bitcoin market, surging its price to almost a record high, rising over $62,000 over the weekend. According to the Twitter boss, Square is looking to building an open source Bitcoin mining system that would be available to individuals and businesses.

Sharing his thoughts further on the initiative, he stated that “Mining needs to be more distributed” and that “the more decentralized [mining] is, the more resilient the Bitcoin network becomes. He also mentioned the apparent inaccessibility of mining stating that “Bitcoin mining should be as easy as plugging a rig into a power source.

Dorsey also believes that bitcoin mining “needs to be more efficient and that “clean and efficient energy use” would be undoubtedly beneficial to the digital currency in the long run.

Dorsey ended the thread by saying that a “technical investigation would be undertaken by a Square team led by Jesse Dorogusker, Square’s hardware lead. If successful, this initiative would be another of Square’s bitcoin focused projects which includes a Bitcoin hardware wallet.

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Financial Leaders from G7 Release Guidelines for Central Bank Digital Currency

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Source: World Atlas

At a meeting that was held in Washington, yesterday, October 13, G7 leaders discussed central bank digital currency and endorsed 13 public policy principles with regards to their implementation. The financial leaders from G7 agreed that CBDCs would complement cash and should not be detrimental to the monetary system. The G7 leaders have been discussing CBDCs this week concluding that they should do no harm and meet rigorous standards.

It should be noted that G7 includes finance leaders in advanced economic nations comprising of Canada, France, Germany, Italy, Japan, the U.S and the U.K. the G7 leaders make it mandatory that any newly launched CBDC should not harm the central bank’s ability to perform its duty of maintaining financial stability. In a joint statement by the G7 finance ministers and central bankers, they said that, 

“Strong international coordination and cooperation on these issues help to ensure that public and private sector innovation will deliver domestic and cross-border benefits while being safe for users and the wider financial system.” 

The joint statement further states that CBDCs are complements to cash and could serve as a liquid or safe settlement assets with an added advantage of anchoring existing payment systems. CBDCs issuance should be entrenched in a long-standing public commitment to transparency, rule of law, and sound economic governance. The statement added at CBDCs must be so efficient that they are fully interoperable on a cross-border basis. 

The G7 leaders agreed that they had a duty to minimize the incidence of ‘harmful spillovers to the international monetary and financial system” 

The G7 statement reiterated a similar statement earlier made by G20 that no global stablecoin project should begin operation until such a token has addressed legal, regulatory and oversight requirements. 

Countries like China and Nigeria are ahead of the pack with regards to the adoption of digital Yuan and Naira respectively. China’s crackdown on cryptocurrency may be a step forward for the country’s plan to promote its digital Yuan. Nigeria, on the other hand, postponed the launch of its eNaira in deference to the 61st anniversary of Nigerian independence on Oct 1. 

However, countries like the US and the UK are dragging their foot with regards to the introduction of CBDCs to their financial system. There are insinuations that America is in danger of being left behind technologically and financially if it doesn’t get serious with the implementation of CBDC in its financial system.

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Understanding Speculation and Crypto Volatility

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Everyone who dabbles in the crypto industry learns almost immediately that the market is very volatile and oftentimes things can change very quickly. That volatility is the fundamental reason why some investors make absolutely stunning gains in so short a time and others lose a lot of money as well. Trading in crypto is one of the riskiest ventures any person can undertake and as they say, it’s not for the faint of heart. The risks can be mitigated of course and sometimes depends specifically on the coin or crypto asset being traded on, barring general market trends.

Nevertheless, to get to the bottom of the volatility concept, one must understand speculation in the market. To start off, the concept of speculation isn’t limited to cryptocurrencies, on the contrary, speculation has existed for as long as economics and trading has. But it is worth saying that speculation is often a feature of novel sectors, assets, commodities and the like. So, even though cryptocurrencies have been around for more than a decade, they’re still in their infancy as far as markets go. One could say that the market is still trying to find its feet.

One of the fundamental reasons why cryptocurrencies are so volatile is that they are fundamentally backed by nothing of value outside the attention that they get. Unlike many fiat currencies which are either pegged to another currency’s value or whose value is unilaterally determined by a central authority, cryptocurrencies only derive value as a function of how many people are willing to use is to transact, i.e. trust in the asset because other people trust it. As a rule of thumb, the larger the number of people who accept the asset, the more valuable it becomes.

This is one of the hallmarks of speculative trading. In the crypto world or in any market that’s novel and untested, many people are in it to win it which means their strategies in trade has the objective of making as much profits as possible in the short term. Therefore, the market enters a subtly dangerous cycle of rapidly changing prices of assets. Basically, investors typically buy assets when prices are low and wait. As more investors are attracted to the commodity for its low prices, it sets off a cascade where more people buy in, causing the price to steadily rise. 

However, all good things must come to an end and it almost always gets to a breaking point whereupon the price gets high enough for investors to begin to sell. This reverses the earlier cascade and as more and more investors pull out, the prices can fall dramatically causing even more to sell off in fear of losing whatever investments they have left. The prices having fallen resets the game and primes investors to begin buying again.

Volatility has been one of the talking points of many critics of cryptocurrencies often comparing it to a Ponzi scheme. And in certain cases, persons of interest with large pulls and audiences can substantially affect the rate at which prices rise and fall. Other factors include government regulations. Volatility at its core reflects the often chaotic nature of trade and market interactions and human hopes and fears.

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