Bitcoin users in parts of Africa have an almost non-existent mining practice yet the virtual currency’s level of adoption is driving more Africans to its trade.
Aside from a Ghanaian firm, Ghana Dot Com (GDC), which claimed it has launched the first Bitcoin mining facility in Africa in March, most mining efforts in parts of Africa are usually done on an individual basis or crowd mining with little or no chance of profitability. This is due to several factors.
“I don't think anyone's doing any mining,” says Tim Akinbo, CEO of Nigeria-based TimbaObjects to Cointelegraph. “Not with the power situation in the country. I can't see how they intend to compete. Well, at least, if their objective is profitability.”
Yet, Akinbo, who helps new users acquire their first Bitcoins by directly selling to them or through online platforms for people he doesn’t know personally, was quick to indicate that Nigerians traded Bitcoin worth N7.4m (about US$37, 150) over a four-week period quoting localbitcoins.com.
Co-founder of Umati Blockchain Ltd in Kenya, Michael Kimani, mined some Litecoins in 2013 using his fast internet connection on a Dell CPU but realized it wasn't profitable.
“Difficulty levels had gone up and I was using an old Dell CPU. By that time, the mining space was crowding out,” he stated in a mail to Cointelegraph citing the coming of ASICs and GPUs. “What I have observed from a Facebook Bitcoin community of Kenyans and from inquiries via email is that people ask how they can get started with mining. Some have bought mining shares on cloud mining services, or giga hashpowers on CEX.io. That's some of the feedback I've received. I can't say who else is mining out there, but I know a lot of early adopters are asking.”
Trading volumes up
However, he too admitted that the African trend in trading in the virtual currency has been encouraging.
“Trading volumes are picking up on peer-to-peer exchange localbitcoins.com,” he said. “I was having a look at data today. Since 2015, over 130 million KES worth of bitcoins have been traded in the local currency, that’s about 2,600 BTC.”
Kimani conducted research on what's been driving demand peer-to-peer markets. The rise stems from the high demand from young people in the region, with most cases revolving around online payments. “Some of the reasons people buy Bitcoins are for depositing money into forex trading accounts which accept Bitcoin deposits. For them, it is quick, inexpensive and convenient to fund online wallets such as Solid Trust Pay, Neteller which accept Bitcoin for deposits within an hour.”
He also mentioned that some buy Bitcoins to make payments on freelancing sites like Fiverr, to pay freelancers who earn Bitcoins in exchange for the local currency and to pay for web hosting services, since “Kenyans are forward thinking progressives.”
“For Nigeria, it is incoming remittances,” says Akinbo as a factor which drives Nigerian’s interest in Bitcoins. “People using Bitcoin to send money to Nigeria get a better exchange rate than those using the traditional banking network.”
Akinbo says he also buys Bitcoins for personal use as a hedge against currency devaluation and for cross-border trade.
They both identify the volume of Bitcoin trade in South Africa, Kenya and Nigeria as the largest on the continent and that there is a gap to be filled in African economies which are overly dependent on foreign currency as a means of settlement whether in online commerce, trade or remittances.
China’s Bitmain hatched a plan to expand over-the-counter Bitcoin trading in non-mature markets such as in Africa by investing $1.6 million in Bitcoin data and trading services provider, BitKan last month. However, to what extent this investment would impact the African Bitcoin trading market will soon be determined.