By Derek Mutiso
When You Have Crypto-Coin You and Everyone Else Are Absolutely Certain That It Is Real
In late 2021, Bitstream Circle-a new crypto-currency company, popped up on the internet. As with
most virtual currencies, it wasn’t immediately clear who exactly was behind it, but their promise to
innovators and early adopters was pretty straightforward- “a daily profit turnover of five to 10 per cent of your seed capital.”
The promoters of this ‘new and exciting’ investment opportunity chose to market it on Telegram, a cloud-based mobile and desktop messaging application with a keen focus on security and speed that offers its users the option of sending heavily encrypted messages which can eventually self-destruct, leaving almost
no trace of them having been sent in the first place.
After a slow start, the currency managed to gain significant traction in the 4- million-strong Kenyan crypto-market. Its telegram group soon had 10,000 followers. Scores of Kenyans bought into the scheme. For some of them, it was the easiest buck they had ever made. Through word of mouth, its telegram followers and investors kept increasing day after day. It seemed like a never ending free-for-all; until one day, some users started to notice cash withdrawal delays.
Bitstream brushed aside any doubts its clients had by claiming that it was modernizing its systems and that
the delays would soon be sorted out. In March 2022, it all came crashing down. The company slithered off into oblivion, taking with it millions of shillings of investor capital. The ‘ghosts’ behind this Ponzi scheme had made quick work of the investors, some of whom knew very little about the crypto currency market, whose value is not managed or maintained by any central body, unlike traditional currencies that are recognized as legal tender.
The most famous crypto currency is Bitcoin. It wasn’t the first one, but most other crypto-currencies didn’t reach public attention until a few years after it was introduced in 2009. What is Bitcoin, and where does this strange currency come from? Oxford Languages tells us that it is a digital currency in which a record of transactions is maintained and new units of currency are generated by the computational solution of
mathematical problems. Because of its digital nature, there is a chance that the same coin can be duplicated, falsified, or spent more than once.
Bitcoin mining eliminates these risks by making it very costly and resource-intensive to attempt to carry
out any of these activities or otherwise “hack” the network. Contrary to popular belief, crypto-currency’s core concept is very straightforward. The principle is the same as buying gold. Gold has been used
as currency for a very long time because it is both rare and difficult to counterfeit. It is therefore a trusted symbol of value.
The same is true for crypto-coins, which are mined by solving intricate equations that can only be handled by powerful computers. When you have a crypto-coin, both you and everyone else are absolutely certain that it is real. Such a coin would be impossible to fake because it would cost the counterfeiter the same
amount of money to purchase or mine a genuine coin. The mining happens in huge warehouses. They actually look more like hangars than conventional mines, and are usually packed with countless rows of computers that use a tremendous amount of energy to run.
A single mine can hold upwards of 20,000 mining rigs. Bitcoin alone uses more electricity than the Netherlands, that’s before you consider the thousands of other crypto-currencies that are now in
use world-wide. The recent crypto currency crash has sparked a debate in investment circles about the viability of crypto-currencies as investments. Edward Snowden, crypto-currency expert and the head of
the Freedom of the Press Foundation, sees more value in crypto-currencies in their use, adding that he doesn’t encourage people putting their money into crypto as an investment.
Appearing virtually at Coin Desk’s Consensus 2022 Conference in Austin, Texas, Snowden stated: “I use Bitcoin to use it. In 2013, Bitcoin is what I used to pay for the servers pseudonymously.” “Generally,
I don’t encourage people to put their money in crypto-currencies as a technology and this is what distances me from a lot of people in the community.” Make no mistake, crypto currencies are digital gold, but their market fluctuations and unpredictability are the real issue. When it was first launched, Bitcoin’s value would soar by hundreds of percentage points over a few months; this was followed by abrupt drops.
In 2020, during the Covid-19 pandemic, Bitcoin saw an increase in value by more than 200%. Given these bizarre growth rates, many people have come to believe that Bitcoin is the perfect investment, arguing that few other things can grow your money exponentially. Some experts however, disagree and believe that it is a bubble at least as far as investment is concerned. All bubbles have certain similar characteristics. In most cases, investment analysts predict slim chances of positive real return. Buyers, on the other hand believe that history isn’t always a guide to what’s coming; they hope that their investment is inherently different from whatever historical data the market analysts use to come up with predictions.
Another common characteristic of bubbles is investors believe that over time, most investments become profitable, and that investing is all about waiting patiently, no matter how long it takes. Irrational excitement is another one of the hallmarks of a bubble. Most crypto-currencies today fall within these criteria.
Most times, the only basis of the seasonal price increases in the price of Bitcoin is other investors’ funds being poured into it in an effort to profit from the upswing. A Ponzi scheme is a phenomenon in which financial rewards are only derived from the capital of other investors. There is a strong case for the gradual replacement of traditional currencies with digital ones; but there is much more reason for skepticism when they are regarded as a way to create wealth out of thin air-or rather, out of terawatts of electricity and hundreds of tons of computers.
One thing investment experts agree on is that crypto is here to stay. The technology enables users to transact anywhere there is an internet connection, for reasonable fees and zero third-party interference. For them, these attributes place it above standard government-issued currencies Africans living in politically unstable countries with no safe access to banks are obviously concerned about the collapse of the banking sector or the arbitrary seizure of funds by the government.
These people may be drawn to use crypto-currencies. The procedural bottlenecks that plague traditional
banking and financial services can be alleviated by using crypto-currencies. According to GSM (Global System for Mobile Communication), Africa had 725 million mobile phone subscribers by December 2020. This means that since then; more Africans have acquired the resources to join the crypto-ecosystem.
According to the UN, Kenya has the highest percentage of crypto-currency users in the whole of Africa.
Many African nations are witnessing an increase in the number of cryptocurrency-based remittance businesses. Abra, has operations in Malawi and Morocco, there’s also GeoPay in South Africa, BitMari in Zimbabwe, and Kobocoin, a crypto-currency based in London that was founded by Nigerian businessman Felix Onyemechi Ugoji. Kenya’s BitPesa, which was established in 2013, enables the transfer of virtual
funds to and from users’ mobile wallets, where crypto-currencies are kept, to locations both in Africa and abroad. As of December 2017, Local Bitcoins. com in Kenya recorded trading volumes that were above $1.8 million, this demonstrates the industry’s profitability.
Can cryptocurrency investments make you wealthy? Yes, just as you can become wealthy by betting on race-horses. The underlying concept is the same: you can only make money when someone else is spending it somewhere else. In the case of cryptocurrencies, that person could just ultimately be you.
Finding a financial advisor who will give proper guidance on crypto-currency will be difficult, and even then, their advice will probably be, “Be very careful.” However, given that some banks are considering trading in Bitcoin futures, it makes sense to trade in some types of crypto-currency in order to have well balanced portfolio. You should however make sure to discuss these investments with your financial advisor so that you are completely conscious of the risks and possible gains.