Ethiopian Cryptocurrency, Blockchain and Bitcoin Background
Bitcoin in Ethiopia, which uses the Blockchain technology, was first created in 2009 and ever since it has grown immensely popular across the globe.
Simply, these virtual coins are created using an expensive and complicated computerized process called mining.
Ethiopia has now seen Bitcoin networks and clubs, such as Bit Club and AWS Mining, across the country and more and more people are investing in them.
Recently, there has been widespread controversy as to the legitimacy of the business models used to sell and buy Bitcoins in Ethiopia.
The main source of income comes in the form of commissions and some experts in the field call them pyramid schemes instead of what Bitcoin was originally meant for...which is an open source software used for basic mining.
Bitcoin investment groups (in Ethiopia) are Ponzi schemes run by criminal middlemen...
Solomon Kassa (host of Tech Talk on EBS)
Blockchain is basically a distributed, decentralized and public digital ledger that is able to record transactions across many computers, making it close to impossible for the information data to be distorted without changes made to all the blocks.
Not having centralized data storage makes the blockchain system difficult to exploit, and in essence making it totally secure.
The blockchain network is controlled autonomously using a peer-to-peer system, allowing authentication through mass cooperation.
The technology was first used to underpin the cryptocurrency, Bitcoin as a public transaction ledger, allowing the cryptocurrency to operate without a trusted authority or centralized server.
According to reports, there are over nine hundred cryptocurrencies based on the blockchain technology today, but the market leaders are Bitcoin and Ethereum.
The use of cryptocurrencies has swept the world in recent years, with everyone from entrepreneurs to computer scientists to young students getting caught up in the mining of cryptocurrencies and even taking the next step and launching their own cryptocurrencies.
This phenomenon has even reached Ethiopia, with a growing number of Ethiopians investing heavily and profiting by unheard of margins.
According to some estimates, there are about a thousand Ethiopians who have invested their money in cryptocurrencies, such as Bitcoin.
Bitcoin Is Created
Cryptocurrency was first created by a person by the name of Nakamuto Satoshi, who is believed to be a Japanese mathematician, computer scientist and a global finance professional.
The idea of creating a replacement for bank controlled currencies occurred to Nakamuto Satoshi after witnessing the 2008 financial crisis.
The banks and their greed-driven, reckless business practices pressed him to build a decentralized currency system, which is self-controlled by a blockchain computing network.
Many believe Nakamuto Satoshi owns over 1 million Bitcoins, which going by its current worth would be valued at over 1 billion dollars.
Bitcoin was launched in 2009, as an open source software and although today there are thousands of alternative digital currencies (not necessarily cryptocurrency) known as Altcoins, Bitcoin still remains the leader of the pack.
For Bitcoin's first five years, mostly large entrepreneurs and investors, such as, Bill Gates and Richard Branson had sole control, similar to a monopoly.
They would spend upwards of a hundred million dollars to build giant mining farms and would keep the Bitcoins they mined for themselves.
Mining can be translated as the act of clearing transactions, like clearing the ledger in a bank.
The mining machines placed in mining farms are powerful computing equipment, with unique software that use a minimum of about 60 Mega Watts, enough to power a modern, mid-sized city.
Five years of Bitcoin's monopoly ended with the creation of the Bitclub Network, modeled similar to a public shareholder company.
The Bitclub Network allowed ordinary people to invest in Bitcoin, and to literally own a small piece of the powerful computing machines placed in mining farms, for a minimum price of about 600 dollars.
The Bitclub Network then provides the investor with a wallet account on their computer, phone or any other smart device.
The small mining machine dedicated to the investor is integrated into the whole blockchain network and calculates transactions made on the investor's behalf, as well as, feeding Bitcoin values and profits directly to the investor's wallet account daily.
Almost all individual Bitcoin investors purchase from the Bitclub Network, since other mining farms are largely monopolized and unavailable for the public at large.
The Bitclub Network uses a massive 200 Mega Watts of power to run its Bitcoin mining farm, which is located on an island, where electricity and cool air is readily and cheaply available.
At its inception, about 10 years ago, Bitcoin was valued at 0.0025 US cents; today it is valued at 3,700 dollars.
"If you bought 5 dollars of Bitcoin seven years ago, you'd be 4,400,000 dollars richer today".
widely used quote
There is an estimated 1 million people who have already invested in the Bitclub Network, with only 10,000 of them being African.
Even so, African countries are beginning to look to cryptocurrencies to diversify and digitize their economies.
Bitcoin ATM's are already being used in Zimbabwe and South Africa.
Cryptocurrencies, Bitcoins in Ethiopia
Bitcoin has grown by a whopping 771% over the last 3 years to reach all-time highs. The newer and second most popular cryptocurrency world wide is Ethereum, which itself has seen its value spike by more than 5,000% year-to-date.
The interest of many Ethiopians has been piqued, wondering if they should join the hordes of investors around the globe.
The talk is that there are a few Ethiopians who have become Bitcoin millionaires, as they had invested in them early.
But cryptocurrencies lie for the most part in a grey area of the law. Their actual usage is limited.
It is based largely on buying on speculation and to an extent used as a hedging mechanism.
In Ethiopia, the trading of Bitcoins and other cryptocurrencies remains mostly as an unregulated activity.
The Bitcoin is not recognized as legal tender by the Ethiopian government and the central bank does not regulate the operations of Bitcoin, therefore, the public must be cautious of the risks connected with the usage of such digital currency.
Unlike many of its Ethiopia's, African counterparts the National Bank of Ethiopia completely disregard the existence of this innovative form of money.
In essence the point is that, Ethiopians, buying and selling Bitcoins are doing so at their own risk.
Ethiopians have no claim against the authorities if the value of their Bitcoins one day crashes down, or the exchange in which they keep their cryptocurrencies is closed down or gets hacked.
Not unique to Ethiopia but most countries have yet to determine the legality of Bitcoin.
However, in May 2018, (EMoST) Ethiopian Ministry of Science and Technology's chief declared a partnership with one of the world's foremost cryptocurrencies supplier.
A Memorandum of Understanding (MoU) with Input Output Hong Kong, a company based in Hong Kong, China, for the utilization of a blockchain application platform called Cardano, a type of blockchain record management platform used in Ada cryptocurrency.
In this case in point, blockchain will be used to trace Ethiopian coffee along the value chain, applying genetic sampling to classify species, origin, and identify pesticides and exposure to any chemicals leading to the authentication of the coffee.
The technology allows management of the supply chain, distributed shares, simultaneous looking and improved security, especially in checking for corruption or mislabeling of consumption goods.
Furthermore, blockchain will be employed to create an interspecies payment token capable of moving sums of money between humans and wild animals.
This payment token, called Linnaeus, will tackle the loss of biodiversity and species extinction in the equatorial belt, including Ethiopia.
A trial of this project will run in protected areas of southern and western Ethiopia.
The agreement also incorporated a training program for Ethiopian university graduates in Haskell programming language.
Following this landmark agreement, the Yirgacheffe Coffee Producers Union in Ethiopia began receiving the value of their exported coffee in Bitcoin.
Despite this breakthrough for blockchain technology in Ethiopia, the government is maintaining its official stance for cryptocurrencies.
Another breakthrough came in the form of a meeting held on September 29, 2018.
The Skygate Hotel located near Bole International Airport played host to a meeting of about 70 potential cryptocurrency investors.
The meeting was organized by the Bitclub Network to teach Ethiopians how Bitcoin works, how to mine and how to invest in it.
Due to popular demand, the meetings are now being held every Saturday for the foreseeable future, with about fifty new attendants every week.
Some meetings are found to be overcrowded, forcing some prospective investors to return the following week.
Hanna Teklie, is an enterprising Ethiopian entrepreneur who lives in South Africa and has been actively involved in Bitcoin trading since she began buying Bitcoin, in its early days.
Through the years, Hanna accumulated more and more, through commissions she receives from new Bitcoin investors, via a marketing network she runs across Africa.
Potential Bitcoin investors from Ethiopia can pay Hanna the registration fee and mining machine fee in Ethiopian Birr, which is vital for a country with a scarcity of foreign currency.
Hanna, will then go on to pay the Bitclub Network in the exact dollar equivalent.
After the payment is made, the investor's wallet account is activated within a month.
Examples of Ethiopian Bitcoin Cryptocurrency Investors
Shiferaw Tamirat, a car importer that resides in Addis Ababa, considers himself fortunate for having invested in Bitcoin, even though he started late.
He bought a mining machine for 3,500 dollars just recently. "Though I first heard about Bitcoin in 2015, I was hesitant. I understood the necessity of it after I traveled to some countries, where ATM's can give you conventional currencies for Bitcoin," he explains.
Shiferaw says Bitcoin can give anyone economic freedom, eliminating exposure to wrong banking regulations.
"After I first bought Bitcoin, many things changed. Now I can buy from Amazon. I pay in Bitcoin, and then Fedex or DHL can deliver it to me.
I can import a Toyota Vitz for between 340,000 ETB to 345,000 ETB and rent it for ETB300 ETB a day. However, I earn 400 ETB to 460 ETB profit a day from Bitcoin.
It is regulated by nobody and by everybody. I want everybody to know about the industry," he says, explaining that cryptocurrencies can even solve issues Ethiopian importers face with hard currency.
"There is a bright future in digital assets."
Bitcoin...simplifies transactions for many across the globe, including Abera Lemma. "You can drink coffee at Starbucks and pay in Bitcoin, which decreases the price of your coffee by half," explains Abera, who was a journalist and author for 30 years before he retired and moved to Norway a few years ago.
Abera, who was one of the first Ethiopians to invest in Bitcoin, says the benefit of owning Bitcoin is that it is reliable and generates more than the interest rate offered by banks.
"Me and my friends, who worked in theatres in Addis Ababa for many years, had no idea what to do with the money from our pensions, which were just sitting in the bank." But after Abera invested in seventeen mining machines, he currently has Bitcoin worth 1.6 million dollars in his wallet.
The Rush to Buy Bitcoin Cryptocurrency
Today there are over one hundred thousand companies across the globe that accepts Bitcoin as a highly advanced payment system, including giants such as, Amazon and Paypal.
To date, seventeen million Bitcoins have been mined globally and the rest are expected to be mined within the next hundred and twenty-two years, after which it will expire.
However, many are in agreement that the remaining 4 million Bitcoin will be totally mined within the next 2 years at its current trajectory.
Once the mining is over, new purchases will stop, but Bitcoins already mined will continue being traded.
Many analysts believe that the issue at hand is not trading the Bitcoin, but dealing with time running out. A small window of opportunity is believed to be left.
Some governments are also beginning to legitimize the use of Bitcoins.
Japan, for example, has recognized the cryptocurrency as a payment method, while the Philippines is recognizing Bitcoin exchanges as remittance companies.
With respected analysts, such as Kay Van-Petersen of Saxo Bank forecasting that the price of Bitcoin could reach 100,000 dollars apiece in 10 years' time, therefore, it is no wonder why everyone, including Ethiopians, are beginning to invest heavily in cryptocurrencies, in particular Bitcoins.