My name is Hanu; Fejiro Hanu Agbodje. I am the Founder and CEO of Patricia. Patricia started as an exchange for gift cards and has swiftly metamorphosed into a crypto exchange that has grown to become one of Africa’s leading crypto and infrastructure providers.
We at Patricia believe that a critical utility of Blockchain lies in its ability to solve inherent, Africa-specific problems to democratize the financial landscape. As a company, we have tackled some of those problems for 900,000 Users and Merchants. In doing so, we have contributed to financial inclusivity, job creation, the development of a talent-based economy, and the creation of new wealth amongst young Africans.
Being different makes you stand out, and taking the path less traveled is crucial to greatness and impact, a trait the typical African youth possesses. I write this memo, ‘The state of Blockchain in Africa, that I might pay forward some of the knowledge I have garnered with other brilliant, disruptive, “typical” young Africans, who also might want to do the most.
African problems, particularly problems in African finance, require ingenious solutions for real change. In most instances, change in the ecosystem often requires large degrees of disruption; the more disruptive you are, the more reward there appears to be. For substantial advancement to be made on the continent, we must drive innovative and disruptive solutions that allow for leap-frogging and transformation. It is this transformative power that blockchain technology possesses. We have seen some level of this disruption in the eastern African finance ecosystem with notable successes around MPESA (mobile money).
Aside from transparency and accountability, the Blockchain can provide high levels of financial inclusion and accessibility that is not currently available on the continent and could be applied in other systems. In a few weeks, I will turn 27 years old. Over the past 27 years, most African nations have suffered from high inflation rates, corruption, poverty, resource misappropriation, unemployment, and many more afflictions that rob citizens of wealth and purchasing power. Currently, the Sustainable Development Goals for 2030 goals seem unrealizable due to the constant depletion of infrastructure and human development on the continent.
Super high inflation rates across Africa have historically been much higher than the global average. Extreme examples such as Zimbabwe’s hyperinflation. Currently, the Nigerian Naira is taking a beating, mirroring the effects of inflation. So many African countries suffer from depreciating and volatile national currencies; currencies such as the Nigerian naira (NGN), Egyptian pound (EGP), Algerian dinar (DZD), Ethiopian birr (ETB), and Ghanaian cedi (GHS) have seen similar situations. Bitcoin and other cryptocurrencies with limited supplies, disinflationary monetary models, and decentralized governance offer protection against such downturns.
Blockchain is so unique that it combines the wealth preservation properties of hard assets, such as gold and land, with the portability of a digital currency. Take all of that and mash it up with the doggedness, strong will, and tenacity of Africans; you get the start of the African Financial Revolution. If there is an innovation that can save and unite Africa, I predict it is Blockchain technology.
If I were to describe the entire Blockchain space in Africa, I would describe the space as YOUNG and DISRUPTIVE.
What is Web3
Web3: Web 3, simply put, is the third generation of the evolution of web technologies, similar to how we have new iPhone models every year. Web3 is the most recent version of the internet.
Before we delve into web 3, we have to touch base on its predecessor, Web1 and web2.
Web1: This is the earliest version of the internet; it is read-only for the web; it mostly offered users the ability to read and research, with hardly any way to interact with what they were reading. Think of it like reading a printed magazine; you can only read it.
Web2: This defines the current state of the internet, Where users can read and also write. The critical difference is writing. Here you can interact with the internet, user-generated content (uploading a video on youtube), Making an order online(Purchasing from Jumia). Web 2 provides users to create content as opposed to just viewing it.
Web3: Read, Write and Own. Ownership is one of the key differentiators between the web2 and the web3, where users would have ownership over Personal Data, money, and virtual assets. In this world, NFTs will give true ownership of digital assets online; wallets will replace bank accounts. In a nutshell, decentralization begins here.
The State of Crypto: Analyzing the landscape.
Peer-to-Peer: Africa accounts for a much larger share of the P2P trading market globally. In 2021, we saw a massive spike in P2P when the Nigerian Government banned Crypto in Nigeria and sent us all a love letter on the 5th of February 2021. P2P had blown up since then and has not locked back. Informal P2P trading is huge in Nigeria. Trades on WhatsApp and Telegram are the order of the day. I have seen young people and Business owners in these groups carry out transactions for several millions of dollars within their small circles. As of April 2022, cryptocurrency exchange Kucoin reported that 33.4 million Nigerians trade or own crypto assets despite restrictions on cryptocurrency transactions by the CBN, using peer-to-peer networks. While Binance is the undisputed leader in P2P in Africa, Paxful, Localbitcoins and Remitano are doing pretty well in this space. Whoever thought of the escrow system, we owe you one.
Political Instability: The instability of national politics and unstable government systems has also been a challenge confronting the progression of the continent. Political instability directly impacts inflation and currency volatility and has far more significant effects, such as forced migration, GDP collapse, and wealth confiscation. Wealth confiscation has been particularly thriving in African Nations. Blockchain can help mitigate or reduce the level of these challenges by offering transparency in government processes through the open system it offers. We can have transparency in voting processes, validation of records and government data, and accountability back in the system. This will increase the confidence of the citizens and foster peace and development.
Unbanked Citizens: Aside from economic and political instability, traditional financial services underserved most of Africa, having a high number of unbanked indigenes. The number of commercial banks per 100,000 adults is 61% lower across Sub-Saharan Africa than the global average. As of 2018, 66% of those living in Sub-Saharan Africa have no access to a traditional bank account. Although, I do not believe Blockchain would Bank the unbanked immediately, as I believe that will be many years of transition from banking the lady who sells groceries in the Kazi (South African term for corner store).
However, if any technology stands a chance, a handshake between Blockchain and traditional finance stands a chance. As a critical innovation, crypto wallets can serve as safe storage for assets and are more secure and accessible than a traditional bank account to re-bank the banked.
Remittances and cross-border payments: The cost of cross-border payment and the lack of infrastructure to facilitate it is both a financial worry and an economic problem. Currently, remittances below $200 to Sub-Saharan countries cost an average of about 9% compared to the global average of 6.8%, while payments between countries are even more expensive. For example, according to the World Bank, sending money from South Africa to Zambia costs 18%.
These overburdensome costs are due to a combination of inefficient policies from the central banks, an uncompetitive banking market, and a reliance on legacy financial communications systems such as SWIFT. Cryptocurrencies are a possible solution to these problems, especially the solutions that prioritize lower fee payments, one of the reasons why the Tron Blockchain is used mainly in Africa. Regardless of the high costs, remittances are hugely important in Africa and key to state revenue. Unlike other regions, most African countries have leapfrogged traditional finance entirely, going straight to mobile banking and now Neo-banking. This trend is also ideally suited to cryptocurrency adoption, which is suited to mobile devices. Mobile payment is already significant. Yet cross-border payment is still a huge pain point; for a few, Cryptocurrencies are the answer, and stablecoins are the choice tokens.
Stable Coins: Stablecoins are cryptocurrency stabilizers and, definitely Africa’s favorite tokens, are Loved by Crypto bros and Crypto traders. From hedging against Ravaging inflation rates, Cross border payments stablecoins are the type of crypto asset that aims to provide stability for users. Tether was the first Stablecoin, launched in 2014, and it remains the model for those that have followed it. Tether remains the most popular type of Stablecoin, with Tron being the most popular Blockchain for Stablecoins.
From the Chinese community using Stablecoins for Arbitrage, The Foreign Exchange Traders using Stablecoins as an alternate source for US dollar, and Africans who struggle to send or receive money across national borders; Stablecoin has had an enormous impact on the African space.
Mining: Mining activity in Africa is almost non-existent; I do not see that increasing, especially now that most Crypto protocols are moving away from Proof of work protocol which directly impacts electricity usage, the climate, and high gas fees are becoming more of an issue than ever before. Now we see the Proof of state slowly becoming the most preferred protocol, as we see with the Ethereum blockchain successfully migrating over.
Funding: The Blockchain industry in Africa is not slowing down; mega crypto deals rock the continent. Metaverse Magna (MVM), a blockchain gaming platform, has raised a $3.2 million seed sale token round, and Mara, a pan-African crypto exchange platform, raised $23 million. In contrast, Jambo, a Congo-based startup, raised $30 million; most recently, Yellow Card raised $40 million. Despite the continued investment in the crypto ecosystem in Africa, the continent accounted for just 0.5% of total global blockchain funding, offering plenty more upside to potential investors.
Although Africa’s blockchain and cryptocurrency funding numbers are still small compared to other regions, they are doing the most and are not slowing down.
NFTS: Non-fungible tokens, aka NFTs, are digital currencies that can be traded and transferred just like real currency. They are bought, sold, and transferred from one person to the other, and ownership of these items, such as art, music, and real estate, can be transferred securely and recorded on the Blockchain.
The Degen craze was not as active in Africa as in other parts of the world. However, we did have our fair share of celebrities jumping on the craze; Nigeria’s foremost Music executive Don Jazzy jumped on the Bored app and was an evangelist for NFTs.
A few notable collections have come out of Africa, with Owo Anietie — a Nigerian digital Afrofuturism artist rising to fame with his work Afrodriods. Afrodroids had 12,117 digital collectibles that got sold out quickly to 3500+ holders. What is most interesting about this project is that 20% of all profits went to charity, and he built a free art and dance academy in Ikorodu, Lagos, Nigeria. Talk about Impact.
Unfortunately, The Market has since plummeted alongside the cryptocurrency market capitalization, following the worldwide trend. According to data from Dune Analytics, NFTs and collectibles recorded on blockchains — have tumbled 97% from a record high in January this year.
Open Sea remains the most popular spot to trade NFTs in Africa.
Government Exploration of Cryptocurrencies: Recently, the Government has made efforts to understand the cryptocurrency and, predominantly, the blockchain sector to develop projects that are part of the digital economy. However, these efforts have not yielded desired results yet; because the Government, instead of supporting existing frameworks, has decided to go on a sole voyage and has not been practical in approach.
For instance, CBDCs were built to the specifications and ideas of the Government and not to suit their users’ use case and pain points. In a nutshell, it does not give value to its users, so it is not counter-productive. The launch of the E-Naira raised hopes and anticipation of a digital currency for all, but due to mismanagement and no practical roadmap, the adoption and use of the E-Naira are non-existent. Recently, I saw the Nigerian Government via the Central bank hosting a hackathon themed “Got what it takes to move the eNaira forward.” While that is a sound initiative, It could have been avoided altogether; real sustainability can only occur if there is a handshake between the private sector and the government part starters
The Government must understand that they cannot shut down the stable door after the horse has bolted. Blockchain is the future, and any effort to ban them or even excessively intervene in its operations; would be futile. Moreover, restricting cryptocurrencies at the moment, when they are facilitating innovations and brimming with potential, would undermine the financing of critical sectors. Blockchain will play a critical role if Africa is to meet its Sustainable Development Goals by 2023.
While decentralized finance and blockchain technology is scalable and operationalized in other countries and regions, African policymakers have struggled to reconcile cryptocurrencies with their existing monetary system. Many countries in Africa have overlooked this financial innovation, and some even went as far as criminalizing it.
Competition: The future is moving very quickly in the blockchain community in Africa. Locally owned exchanges like Patricia, Buycoins, Quidax, and Tradfada are growing fast. Internationally owned exchanges Yellowcard, Binance, and Paxful, have a solid presence in the space. Blockchain technologies are proving to be effective for a multitude of uses. Hence competition is getting a lot stiffer. The Battle for supremacy in the African market is for the deep-pocketed and, simultaneously, for the brave. The international community flooding into Africa does not make it a more accessible landscape for local players to compete in.
However, this dexterity of the local players in the space exhibit may tip the curve. Patricia, Quidax, and Tradefada are examples of locally owned exchanges redefining the face of Crypto in Africa. The race will get tougher; rumors of 9-digit deals linked to Global Crypto exchange flocks around town. I believe as adoption gets deeper, so will competition too.
My Vision
I have a dream * In Martin Luther King’s voice*.
I have a dream where Africa becomes the HQ for Blockchain globally, where we OWN and dominate the industry, and we rule with no fear. I believe this is possible because we are already doing so with little or no infrastructure and government regulation. Nigeria is the fourth country with the most use for crypto today, with 22million users.
Africans can do this, but first, we must choose to do that; as you know, flowers never pick themselves. We need to take this seriously; I mean Government and privately owned firms here. I put the Government first because most of the issues we face are real policy issues; many startups are only in Business because their solutions are walking around inefficient government policies. The Government has to choose to tackle infrastructure. We cannot flourish when we still have to deal with the infrastructural deficit; I dream of an Africa where Internet connectivity, the High cost of internet Data, and electricity are not at the forefront of challenges. I envision innovation hubs and free trade zones carved out to address technology. I have a Vision where Africa does not depend on fossil fuels or resources from the ground. However, we depend on the intellectual prowess of Africans and tenacity to conceive an idea and execute it to the highest possible standards.
I wrote this memo and intentionally did not turn it into a sales pitch for Patricia. Why? Because I want to focus on increasing the share size of the African Pie, as opposed to who has the largest piece of pie. Africa is jam-packed with some of the world’s biggest things, the largest desert in the world, the Sahara Desert, The longest river in the world, the Nile River, and many more. Africa can be known as the continent with the largest number of blockchain Unicorns in the world. This is the Africa I want to help create and be a part of.
The future is changing, and so are we. It will not happen overnight, but Blockchain will unlock new opportunities for African communities in Africa and globally over time.
I have a vision for Africa, where we create the products and not buy the products.
PREDICTIONS
I think we are in the middle of the fifth revolution; when the fourth revolution was underway, it faced similar criticism Blockchain, and crypto currently faces today. Companies like Paypal and Amazon were seen as facades, but they ruled the world many years later. Today almost everything has changed except money.
As Elon musk and Jeff Bezos race to conquer outer space, it becomes more evident to me where we are going. I believe at some point, humans will become a multi-planetary species. When that time comes, what would we spend on Mars, South African Rands, Dollars, Chinese Yuan, Euro, or Naira? I do not think so; I believe we would go digital. We would spend crypto. These are a few predictions I foresee happening within Africa and the entire Blockchain space within the next years and decades.
Ethereum to become a Market leader: Judging by Ethereum moving to the Proof of Stake Consensus Mechanism, the Ethereum network has addressed a lot of the bias’s on Green energy, also based on the utility that Ethereum provides, I predict Ethereum to become a market leader and surpass Bitcoin. There is an excess of over 50 million active Ethereum users today, and I do not see it slowing down anytime soon.
Crypto Regulation: I get it; Crypto is volatile, you cannot control it, it can be exploited, etc. My granddad always says you should not throw the baby and the bath water out. Crypto has been struggling for legitimacy in Africa. However, Africa is going to have Crypto regulations. Ultimately, Africa must look to curtail the spread of scams while also developing regulations that promote the fair use of digital assets. It is inevitable; I also foresee more traditional players getting into the space, verticals like Neo banks, payment processors, and switches offering crypto infrastructure.
Stablecoins: While the pros and cons of stablecoins may be debatable, their rise is not. So far, More than $113 billion in coins have already been issued. Stablecoins provide a simple solution for a complex solution; as long as users seek stability, the rise and rise of stablecoins in Africa are almost a given.
The Tron blockchain would continue to scale because of the cheap fees it offers its users. There are over 113,000,000 wallet addresses, and I predict its continual growth.
Crypto Payments: These will rise, especially once favorable regulations begin to fall in place. Right now, Businesses are scared of infringing on their respective Central Bank’s stance on crypto. The advantages of crypto payments outweigh the downsides; no chargebacks or PCI compliance to worry about. Accepting crypto payments gives businesses, whether small or big, access to a global market and reach; in addition, it could attract Business from crypto enthusiasts. I foresee the rise. Patricia has also positioned itself rightly with Patricia Business to lead on this frontier.
Crypto for Content Creators & Content Creation: I predict a massive shift in this space. Why? Numbers. The take rates of web2 giants are extortionate; web3 platforms offer fairer economic terms. Suppose we compare Meta’s nearly 100% take rates across Facebook and Instagram to NFT marketplace OpenSea’s 2.50%. The difference is quite clear. If we delve deeper into Apple store’s 30% fee across the ecosystem, we will begin to see that the web 3 space offers higher value to content creators. Over time they would begin to notice this, which would spur more web 3 projects to emanate. Web3 is tiny but mighty.
FUNDING: What I find most interesting in this ecosystem is that most startups kick off without funding and, surprisingly, move to success. It is such an African thing. Startups like Patricia and Jet pay by Blord group are clear examples of this. The sheer tenacity of Africans to succeed and excel does most of the work.
However, to compete and become dominant, funding is necessary. Funding is a crucial enabler and necessary catalyst for startups to supercharge and experience hyper-growth.
Funding will flow into the African space; daily international investors are seeing the relevance and intrinsic value in the continent.
I also predict more and more acquisitions of local companies as larger and more established international firms would want an inroad to Africa, as was the case with Stripe and Paystack.
Gaming & Gaming Guilds: Gaming has never been more interesting as it has been in recent times. Gaming Guilds are gaming groups, or a community that connects gamers, investors to games and Gamefi projects. Where gamers get scholarships to play games by renting out NFTs with the promise of splitting profits when players earn. Gamers build a community and stay in touch with themselves while playing games. The more important thing is the reward system that the introduction of Blockchain provides to gamers.
Games adapted to the crypto space have allowed gamers to connect directly with other players, stream games, earn and trade in-game items even more transparently. The catch here is to earn. Based on Statista numbers, Africa has over a 650million population 17 years and younger. Gaming guilds will present a massive shift in wealth creation as the African population is young and ready to take on new wealth creation schemes.
With the launch of guilds like African Gaming Guild. Key players are already seeing this opportunity and
Decentralized Finance: Decentralized Exchanges are still very novel to the African community, as only a few persons would even know of Metamask or Uniswap. However, I believe this has the most use case and poses the real opportunity to get loose of the current choke held by traditional finance.
A quick intro to Decentralized exchanges (abbreviated DEXs), Decentralized exchanges are alternative payment systems that do not rely on banks, or brokers, to name a few, but use smart contracts on the Blockchain. DEXs are not huge now, but when they do take off, there will be no stopping them.
Gambling: Blockchain in gambling is another industry shaker and potential game changer. Crypto Casinos, Traditional Betting companies, adopting crypto as a means of on-ramping & off-ramping, anonymity, Dapps, and gambling have existed since the beginning of human history. However, the wave about to come would be unlike anything else.
With Blockchain technology, traditional Betting companies would be able to payout wins and accept payment from anybody in the world with a crypto wallet. New concepts like no-risk betting would emanate; utilizing Defi technology, people can place bets without the fear of losing a dime but still with the upside of a large pot win. The African industry has been slow to accept this primarily because of the regulatory bottlenecks, but this area is up-and-coming, and I see it flourishing.
Metaverse: Virtual lands, NFTs, and Meta, formerly Facebook, are the usual suspects when the Metaverse comes to mind. Africa is still very, very much behind in creating and building this immersive, universal virtual world. The Metaverse would be massive for brands and Marketers, African and international brands; simultaneously, the possibility of reaching over 10 million people at a go is quite juicy. I envision Metaverse concerts and virtual meetings moving to the Metaverse (watch out, Zoom). I suspect Africa would trail behind in this for a while because of the skill set, technical know-how, and capital needed to build a thriving virtual reality world. Can Africa enter the Metaverse? Meta predicts that $40billion could be added to Africa’s economy via the Metaverse. If this is true, then best believe Africans would be hopping on this train. I like to think about the Metaverse as a continuous evolution and journey. Thus, the continent and its people would figure out how we will participate in this evolution. Simply put, the Metaverse will give us a new way of being.
Crypto in real estate: Fractionalized/tokenized ownership. One of the most exciting developments in real estate is the idea that properties can be sold and managed in a blockchain-based marketplace. Already it is a concept I hear whispers of here and there in the land. This concept can help create more liquidity in property and reduce barriers of entry and ownership by creating digital tokens that represent fractional ownership of real estate assets. We have seen marketplaces like Canadian-based Liquid collectibles by Logan Paul launched internationally, which is built around this concept.
Cryptocurrency and Blockchain would become more visible players in the real estate sector. It is not only the technology that makes this concept so unique but the concept of giving the regular low/middle-class earner access to an investment they would ordinarily not have ever found an entry point into. Blockchain in real estate can revolutionize the industry through advanced fast, intuitive, and secure transactions. With smart contracts, consumers can buy or sell real estate quickly and easily through Blockchain.
Crypto inclusions in traditional trading asset classes: There has already been a breakthrough on this front, with the first Bitcoin ETF making its debut on the New York Stock Exchange. The development represents a new and more conventional way to invest in crypto. The Bitcoin ETF allows investors to buy in on cryptocurrency directly from traditional investment brokerages they may already have accounts; this is but the beginning.
Once this concept gets introduced into the African space, I see large conglomerates like GTbank co and investment houses emulating this.
Crypto Pricing & Bull run: My final prediction is this, we would see Bitcoin crossing over the $500,000 threshold in this lifetime. Bitcoin is a good indicator of the crypto market because it is the largest cryptocurrency by market cap and the rest of the market tends to follow its trends. Hene other cryptocurrencies would follow.
Key Takeaways
- Crypto, Blockchain, and web3 are still in their infancy in Africa.
- Web3 gives people property rights: the ability to own a piece of the internet. The Fifth revolution, as I like to call it. Read, Write and Own.
- Blockchain is growing faster than the internet did. Since the official release of Bitcoin in January 2009, the growth of this technology has been exponential, growing at a much faster rate than the internet did back in the early 80s.
- There is a huge market opportunity at the intersection of web3 and gaming.
- Bitcoin is a good indicator of the crypto market because it is the largest cryptocurrency by market cap and the rest of the market tends to follow its trends.
- A gaming guild (play-to-earn) allows gamers to start playing crypto games without investments. Gamers, or managers, give scholarships to new members, essentially renting out their NFTs for gamers to use in the game.
- Peer to Peer trading is King in Africa.
- Crypto is traceable.
- Africa has a young population and is ready to lead Blockchain adoption.
Conclusion
Africa has the potential to become a leading player in the Blockchain by investing in her talent, education, leading crypto and blockchain adoptions, and making tight regulations that have the effect of encouraging people to get into the space.
While no one can predict the future of cryptocurrencies, I know that the novelty requires an equally nontraditional regulatory approach — one as invested in the virtues of experimentation and entrepreneurship as the practices it aspires to oversee.
There is a chance to position Africa as the bedrock of crypto in the world, and this is the future I am banking on.
Stay doing the most of my best, as always.
Fejiro Hanu Agbodje.
