Brewing Bitcoin

The Brewing Bitcoin Rush In Ethiopia

Since its creation in 2009, Bitcoin has grown popular across the world. During its earlier years, it was almost monopolized by mega investors. But later on, with the establishment of Bitclub, ordinary people became able to invest in Bitcoin and to own small computing machines on their farm. This includes Hanna Teklie, an Ethiopian entrepreneur and many others who are investing in cryptocurrencies, as EBR’s Ashenafi Endale writes.

The use of cryptocurrencies has swept the globe in recent years, with everyone from businesspeople, to programmers, to students getting involved in mining Bitcoin, and even launching their own cryptocurrencies. The trend has spread to all corners of the world and now reached Ethiopia.

On September 29, the Skygate Hotel located near Bole International Airport played host to a meeting of almost 70 prospective crypto-currency investors, organized by Bitclub Network, an international company engaged in Bitcoin mining, to teach people how Bitcoin works and how they can invest in it. The meetings have been held every Saturday for the last seven months, with 50 new attendants on average. The meeting was so crowded that some people even had to return home.

Ever since Bitcoin was created in 2009 it spread globally at record levels. Bitcoin is a type of cryptocurrency, which operates on an internet network that uses cryptography and converts eligible information to an almost untraceable code, to track purchases and transfers. It was created by a person going by the name Nakamuto Satoshi, believed to be a Japanese mathematician and computer and finance expert. The concept of creating a substitute for bank-regulated currencies occurred to Satoshi following the 2008 financial crisis. Banks’ irresponsible business practices pushed him to create a decentralized currency system, which is self-regulated by a block chain computing system.

Satoshi, who is believed to possess over one million Bitcoins, which today would be valued at over a billion dollars, thought the crisis was more due to an unjust financial regulation system, especially printouts of phony money, than a failure of economic principles.

Since Bitcoin was launched as an open source software, some 4,000 alternative digital currencies known as Altcoins have been created. However, Bitcoin is the first and most well-known digital currency. Five years after the creation of Bitcoin, Bitclub Network was founded by Russ Medlin, similarly to a public shareholder company. It has a 200MW powered bitcoin mining farm on an island, where electricity is cheap and cooling air is plentiful. Bitclub is the only publicly owned Bitcoin mining company. Established with USD30,000, Bitclub’s total value is currently USD750 million, following an increase in the value of Bitcoin from 0.0025 US cents nine years ago to USD6,500 now. It is expected to top USD100,000 before the end of 2018, and one million dollars within five to ten years.

Bitcoin is mined using powerful computing machines that need at least 60MW of electricity:enough to power a medium-sized city. ‘Mining’ means clearing transactions, like clearing the ledger in a bank. The mining machines also use unique software. Large investors like Bill Gates and Richard Branson have installed giant mining farms, spending at least USD80 million on them. As a result, Bitcoin was almost monopolized from the start by mega investors who preferred keeping the Bitcoins they mined for themselves.

It stayed this way until the establishment of Bitclub, which enabled ordinary people to invest in Bitcoin and own small computing machines on the farms, for a minimum price of USD500, with a USD99 registration fee. The investor is then given a wallet account on their phone, computer or other device. The machine, dedicated to the investor and integrated with the whole block chain, computes transactions on the investor’s behalf, and feeds Bitcoin values and the investor’s profits to the wallet account daily. The farm has numerous mining machines, known as ‘ant miners’, which work 24 hours a day.

Globally, almost one million people have invested in Bitclub so far, even though less than 10,000 of them are African. However, an increasing number of African nations are embracing cryptocurrencies including Bitcoin in order to digitize and diversify their markets. In fact, interest towards cryptocurrencies has spread in Africa from South Africa and Zimbabwe, to Kenya, Nigeria and Ghana.

Bitcoin ATMs are already a reality in African countries like South Africa and Zimbabwe, while entrepreneurs in Kenya have started crypto mining to find alternative methods to raise money for their businesses. In addition, Bitcoin sales have been soaring in Nigeria with an average of USD4.7 million in Bitcoin sales monthly since January 2017.

According to the World Bank, cryptocurrency can offer prospects to the unbanked population residing in sub-Saharan Africa, which was estimated at close to 400 million people in 2016. Similarly, Global Risk Insights, a company known for political and economic risks analysis, indicates that the major factor that has induced the development of the cryptocurrency market in Africa is the presence of a large informal sector.

Cryptocurrency can also be useful for boosting remittances for African countries facing foreign currency shortages since cryptocurrencies such as Bitcoin allow currency transfer between two parties without the involvement of intermediary institutions such as banks or other financial providers. For Africa, which receives more in remittances each year than in foreign aid, the impact of digital currencies could be immense.

In eastern African countries like Ethiopia and Kenya, block chain technology, which was built by Bitcoin has already been deployed. For instance, in May 2018, Getahun Mekuria (Eng.), Minister of Science and Technology, signed an agreement with Charles Hoskinson, CEO of Hong Kong based IOHK. The company provides cardano, a type of block chain record management application. Following this, Yirgachefe Coffee Producers Union in Ethiopia started exporting coffee and receiving the value in Bitcoin.

Hanna Teklie, an Ethiopian entrepreneur based in South Africa has been involved in Bitcoin trading since she started buying Bitcoin very early, when she was on maternity leave. Over the years, she’d accumulated more and more, through commissions from new investors, via a marketing network she runs across Africa.

Investors from Ethiopia can pay Hanna the money for registration and to buy the machines in birr, since hard currency is scarce in Ethiopia. She then pays Bitclub the dollar equivalent. The investor’s account is activated a month after the payment is made. Almost all individual Bitcoin investors buy from Bitclub, since other mining farms are monopolized and not available to the public. As the popularity of cryptocurrency has increased, companies have even started accepting Bitcoin as payment for services.

Shiferaw Tamirat, a car importer based in Addis Ababa, considers himself lucky to have invested in Bitcoin, even though he started late. He bought a mining machine for USD3,500 just three months ago. “Though I first heard about Bitcoin in 2015, I was hesitant. I understood the necessity of it after I traveled to some countries, where ATMs can give you conventional currencies for Bitcoin,” he explains.

Shiferaw says Bitcoin can give anyone economic freedom, eliminating exposure to wrong bank regulations. “After I first bought Bitcoin, many things changed. Now I can buy from Amazon. I pay in Bitcoin, then Fedex or DHL can deliver to me. I can import a Toyota Vitz for between ETB340,000 to ETB345,000 and rent it for ETB300 a day. However, I earn ETB400 to ETB460 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.”

One of the first items purchased with the crypto currency was pizza. Now, the amount of Bitcoin used to buy those pizzas is valued at USD100 million. Currently over 100,000 companies across the globe accept Bitcoin as a highly advanced payment system including Amazon, and Paypal. This 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 17 mining machines, he currently has Bitcoin worth USD1.6 million in his wallet.

A few months ago, he flew to South Africa, representing Ethiopia, along with 3,000 other African Bitcoin investors, for a meeting with Hanna. “I was the only one from Ethiopia. There were 120 people from Kenya, and more from Egypt, Nigeria, Swaziland and many African countries. All of them were dying to meet Hanna, who met with me at her house.”

So far, 17 million Bitcoins have been mined globally and the rest are expected to be mined within the next 122 years, after which it will expire. However, many agree the remaining four million Bitcoin will be totally mined within the next two years at the current pace. Once the mining is over, new acquisitions stop, but already mined bitcoins can be traded.

While many consider cryptocurrencies just a trend, others think it is a revolution against regulations.“Prior to the 2008 economic crisis, banks usually dealt with huge fiat currency figures, without the actual money at hand. Following the printing of huge sums of notes, the conventional currencies lost value. Finally, you learn the money you deposited at the bank has reduced value. That is what Bitcoin corrected. There is no inflation, no irresponsible bankers, or valueless notes flying around the globe,” argues Shiferaw. “We need to work hard to make sure more Ethiopians are investing in Bitcoin.”

So far roughly close to 1,000 Ethiopians have invested in Bitcoin, according to Christian Russom, consultant at Bitclub Network Ethiopia, who advises new investors.“For now it is not about trading in Bitcoin, but about coping with the running out time. There is a very narrow opportunity,” he says.

7th Year • Oct.16 – Nov. 15 2018 • No. 67

Ashenafi Endale

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