Bitcoin's Bottom Billion - Why the Developing World May Be Bitcoin's Biggest Customer

Bitcoin is a bubble.

There, now that I've got all the skeptics on my side, we can move forward. There are any number of arguments as to whether Bitcoin is currently under or over valued, but in the end nobody really knows, so let's just leave that be. As a matter of fact I'm going to ignore the recent Bitcoin volatility completely and instead focus on a side of Bitcoin that doesn't get covered much, its use as a digital currency in the developing world.

Bitcoin is almost always billed as a replacement for credit cards and PayPal, which is a shame because on that front I think Bitcoin mostly loses: transactions can be slow to settle, Bitcoin security makes everybody paranoid, and most importantly there are very few places to actually spend said Bitcoins when compared to credit cards. Let's face it, for those that can get credit cards, they work incredibly, incredibly well, but that still leaves the other half of the world unaddressed.

For example here in Rwanda, virtually no one has a Visa or Mastercard. A few banks offer Visa cards, but they come with high monthly fees or minimum deposits. Rwanda, like its neighbors, is very much a cash society, which means that most digital goods are out of reach, not because they aren't affordable, but simply because most Rwandans don't have credit cards.

A case in point: hosting and domain names. At the kLab, a software innovation hub here, we work with tenants who struggle with making the jump from having a site running on localhost to one running on the web. Right now most muddle through by using free tiers on AppFog or Heroku, but once they need more than that they get stuck. There are a few enterprising souls who have gotten Visa cards and resell hosting, but the really excellent services remain inaccessible.

Step in Bitcoin and that is largely solved. Today, right now, I could sell a Bitcoin to someone in the kLab for cash and have them go buy hosting or a domain on Namecheap, without having to apply to a bank or fill out any forms. It really is digital cash, and in societies where cash is the norm, I can't help to think that it will be a more natural leap than credit cards. All it would take to enable a whole new class of consumers is for the countless foreign exchange bureaus in Kigali to start exchanging Bitcoins.

Now of course East Africa is already famous for having lightweight digital payments, the most famous being M-Pesa in Kenya. But here I think we start to see why Bitcoin's decentralized nature is such a plus. M-Pesa has some serious transaction fees, really only works in Kenya, and most importantly doesn't really facilitate participating in the global marketplace. As much as I love M-Pesa, I don't think we'll be seeing Namecheap accept it anytime soon. Even regionally it is a struggle, while Kenya, Tanzania and Uganda are all neighbors and the largest mobile money markets in Africa, their systems aren't interoperable.

In that sense Bitcoin really is "The World"'s digital currency. Foreign exchange bureaus across the globe could start selling Bitcoins and by doing so enable anybody to buy digital services. 

But that is only half the story, perhaps the most exciting part of Bitcoins is how it enables merchants.

If you think getting a Visa card is hard in Rwanda, getting a merchant account so you can accept Visa payments is a whole different story. And again, here Bitcoin shines. Someone in Rwanda that builds a compelling service can instantly start taking payments from the rest of the world, without asking for permission, without filling out any paperwork and with the same fee structure as the biggest retailers.

So Bitcoin is exciting to me not so much because it is a new currency, but because it has the potential to be a globally recognized, yet completely decentralized, form of digital payment.  

That depends on Bitcoin adoption continuing to rise and for the price to stabilize, both still very tenuous suppositions, but the potential is there. A lot has been said about how we all live in a global economy, that the things we use every day come from all over the world. That may be true, but we don't yet live in a DIGITAL global economy, only the rich get to participate in online commerce. Bitcoins may just change that.

14 responses
Most importantly there are very few places to actually spend said Bitcoins when compared to credit cards.
Hi Nic, Eric, So lets do it! I am keen to be part of the first Bitcoin FX exchange in Rwanda. Seriously - what would it really take to make this happen? Paul.
Great article, and truly on point for why Bitcoin is so necessary for developing nations. That being said; I disagree with the idea that bitcoin isn't a superior and much needed alternative to the current cedit/debit-card/western union/pay-pal fiasco... I'll just briefly explain why debit/credit cards are terrible. Lets say I'm a customer shopping at Walmart. I use bank X (call it wells fargo) Walmart uses bank Y(call it chase if you want)... I begin to buy bag of cheetos with my debit card... A credit or debit transaction is what's known as "pull" transaction... that means that I open up my entire account to them with my debit card; and I trust the merchant to withdrawl only the amount of funds we agreed upon. Not only that, but now whoever you bought something from has all of the information required to steal you're identity..... you might say, well; wallmart won't steal my identity, they have too much to lose.... of course they won't but when a company gets HACKED LIKE TARGET they like 100,000 identities stolen. It's the same way that when you buy something online, you give that person your cc number, your sec code, name/ address EVERYTHING THEY NEED to steal your identity. So, now I've opened up my account by swiping my card for the cheetos.... and because Walmart is a nice company they don't rob me blind. So that's the end of the transaction right? WRONG the money doesn't magically fly from my bank to Walmarts bank... ever thought of why it takes 2-4 days for a credit card transaction to complete and the funds to actually arrive??? When I swipe that card no money gets sent, what really happens is it tells Walmarts bank that I'm good for it; then my bank freezes the funds in my account... and now my bank owe's walmarts bank the 2 dollars... then at some point that money is PHYSICALLY MOVED from one bank to another. Who do you think pays all the salaries of the bankers, and the armored car drivers and the armored car itself? YOU DO with the outrageous fees that are put in place to support this gargantuan infastructure, because up until Bitcoin and the true defeat of the "double spend" we needed the infrastructure to move these giant piles of paper. So that was just a fraction of the customer side protection/savings that bitcoin creates... and if you guys really want to know.. or anyone reads this at all.. just comment at me... .... and I'll scratch the surface of the merchant side protection/ no chargebacks/ when someone buys something with a stolen credit card, the identity victim stops the transaction, the thief gets away with whatever he bought.... and the merchant is left as the real victim.... but that's another rabbit hole.... freedom through education
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