Crypto
Proof Of Resilience: Financial Freedom Through Bitcoin In Africa
This is an opinion editorial by Alexandria, a citizen of Zimbabwe and a second year business administration student at Liaoning Shuhua University in China.
Have The Majority Of Africans Ever Had Access To Wealth Like Bitcoin?
If the question were to be posed, “Do many people in Africa have shares in Google, Amazon or Microsoft?” or “Have many people, from Africa, built wealth from any of the above listed public companies?” The answer, for the majority of individuals in Africa, would be a resounding “No.”
The main reason why a lot of Africans are not able to participate in the New York Stock Exchange (NYSE) is that one has to have banking interoperable with American systems. Within this American system, individuals operate and deal with either American brokers or American banks that are all part of an exclusive and impenetrable closed monetary network. These financial institutions and organs almost always require sizable amounts of money from foreigners for the minimum account opening deposits or balances.
In recent years another crippling stipulation posed to non-American applicants is that their country of citizenry must presently have good bilateral relations with the United States of America. If, like myself, you were born in a sanctioned country, you will suffer from unilateral illegal sanctions imposed by the U.S. Office of Foreign Assets Control (“OFAC”) which will block any access to the NYSE and many other Financial markets and services.
“I was born in 1930 the odds were probably 40/1 against me being born in the United States. I did win the ovarian lottery on that first day and on top of that I was male and if I’d been female my life would have been far different. So put that down as 50/50 shot and the out of the odds are 80/1 against being born a male in the United States and it was enormously important in my whole life.” — Warren Buffett
Warren Buffett states that it was enormously important that he was born in the USA. This is true because if you were to Google search Warren Buffett’s annual report you would see that his returns, over the last 57 years, averaged 20% returns on compound interest alone. This resulted in Warren Buffett achieving a compounded 3,641,613% return on his investments.
Warren Buffet demonstrates the numerical importance of accessibility and the importance of participation in financial markets, especially markets as liquid as the NYSE. This, for the most part, excludes Africans.
Accessibility To Wealth Through Credit For Africans And African Americans
The Great Depression may have started because of a stock market crash, but what hit the general economy was a disruption of credit — every citizen was unable to borrow money, rendering them incapable of doing anything. Credit has the ability to build a modern economy, but lack of credit has the ability to destroy them, swiftly and absolutely.
Let’s start off with the subject of discrimination that has lead to part of the impoverishment of my people.
African American Access To Credit:
Redlining: The term came about when the government created color-coded maps that told banks where they could give out housing loans. Green sections were a go ahead and red sections populated by black people were deemed too risky. Redlining blocked off entire black neighborhoods from access to public and private investment. Banks and insurance companies used these maps for decades to deny black people access to loans and other services based purely on race. Home ownership is the primary driver of wealth but African Americans in their neighborhoods paid higher insurance premiums, higher interest rates and were denied mortgages more often.
“You can’t get a loan, you can’t own a home, you can’t start a business. Which means you can’t build wealth. You’re excluded from the American dream. Why is it so important to you to exclude an entire race of people from the American dream?” — Anthony Mackie in, “The Banker”
African Access To Credit:
In 1930 the land apportionment in Rhodesia (now known as Zimbabwe) made it illegal for native Africans to purchase land outside of the established native lands. The native African population was above 1 million while that of the Europeans was less than 50,000. That put the European population at only 5% of the population yet they had more than 51% of the land while 95% of the population only got 28% of the dry rocky lands which were called “reserves.”
In 1980 Zimbabwe became independent, after a long war. They then began negotiations for a settlement at the end of the war which led to an agreement termed The Lancaster House Agreement. The Lancaster House Agreement stated that the new government could not draft legislation to compulsorily take land for the next 10 years. The only way landless black people could be resettled is if they were to buy from whites that wanted to sell. Only a few white farmers did sell. Up until the 1990s less than one million hectares of land was given up for resettlement only.
“Only 19% of the almost 3.5 million hectares of resettled land was considered prime or farmable. 75% of the best land was still about 4500 white farmers.” — Human Rights Watch
In 2000 land reform programs began, white farmers were forcefully displaced from farms and were replaced by new black farmers. This was a massive deal internationally and historically. It had never been attempted before. Zimbabwe also challenged imperialistic powers by joining the fight for an apartheid-free in South Africa. Zimbabwe also joined the fight against imperialism in The Congo. So in 2001 the United States of America reacted by enacting two types of sanctions.
The first were Congressional sanctions: ZIDERA, Zimbabwe Democracy and Economic Recovery Act stops Zimbabweans from getting loans from multilateral lending institutions. Especially restructure and development loans.
The second are Executive Order sanctions. America has tried to call it targeted sanctions but when you look at the list of targeted sanctions you see a prohibition for any company in the world to do business with Zimbabwe. Otherwise those companies will be penalized or face jail sentences according to the International Economic Emergency Powers Act.
These were unilateral sanctions imposed by the United States of America. These unilateral sanctions were only possible because the United States currency dominates the world’s payment systems and a major portion of the world’s global business is done in America. So anybody that wants to do business often has to do it with America and has to cooperate with America. They need to have a bilateral agreement and relationship with America. Yet these bilateral relationships are the ones that America uses to enforce its sanctions or what we call the executive order Sanctions and these ensure that other countries across the world implement those sanctions or suffer secondary sanctions.
Executive order sanctions actually state that if a country or company assists the government of Zimbabwe with software, finance, logistics, machinery, equipment in trade that company can also face sanctions because the Americas are trying to make the sanctions effective. However, those who place international sanctions argue that our sanctions are actually self imposed sanctions due to the fact that even before the ZIDERA sanctions of 2001 — in 1999 Zimbabwe failed to pay its debts to the International Monetary Fund and the World Bank which meant that Zimbabwe was banned from access to credit from these two multilateral institutions. Then again there is a misconception that sanctions in Zimbabwe did not start in 2001 but rather actually started in 1980 when we got independence. At independence Zimbabwe was left with Rhodesia’s debt. Additionally Zimbabweans were not given reparations for the destruction made by the Rhodesians that cost the nation over a trillion dollars.
Another Case Of Self-Imposed Sanctions
In Zimbabwe the interest rate is 30% per month. In only four months the interest paid on the loan would be more than the principal. This is because Zimbabwe’s interest rates have to continuously be re-adjusted in order to compensate for the hyperinflation which peaked at a whopping 600%. In addition — Zimbabwe does not have a sovereign credit rating from the three international credit rating agencies. The government has not yet solicited a rating from the big three rating agencies. It is among the African countries that are yet to request an international sovereign rating. A favorable rating enables governments and companies to raise capital in the international financial market. Institutional investors in both the developed and developing world rely heavily on rating agencies in making investment decisions.
Being unrated makes it harder for the government to get funds for big debt projects or to get debt relief. It makes it harder for entrepreneurs who are struggling to grow their businesses due to lack of funding. Individuals who lack funding cannot get a mortgage and hence cannot own a home of their own. The end result is that under these circumstances one cannot build wealth.
Can Bitcoin Finally Grant Africans Fair And Free Access To Wealth?
For centuries, Africans and African Americans have suffered from severe discriminatory policies in regards to access to credit through redlining and sanctions which both prohibited credit or increased the cost of credit. The innovation of Bitcoin was imperative for Africa and African Americans as it allowed anyone on earth access to it, and this time it includes Africans. It is not a surprise at all that Sub-Saharan Africa is leading in Bitcoin adoption.
This time Africans and African-Americans don’t have to worry about discrimination. Thanks largely to the innovation of DeFi on bitcoin, this is the long awaited-for innovation and crucial step in Bitcoin scalability and utility in Africa.
El Salvador’s Minister of the Economy Maria Luisa Hayem Brevé submitted a digital assets issuance bill to the country’s legislative assembly, paving the way for the launch of its bitcoin-backed “volcano” bonds.
First announced one year ago today, the pioneering initiative seeks to attract capital and investors to El Salvador. It was revealed at the time the plans to issue $1 billion in bonds on the Liquid Network, a federated Bitcoin sidechain, with the proceedings of the bonds being split between a $500 million direct allocation to bitcoin and an investment of the same amount in building out energy and bitcoin mining infrastructure in the region.
A sidechain is an independent blockchain that runs parallel to another blockchain, allowing for tokens from that blockchain to be used securely in the sidechain while abiding by a different set of rules, performance requirements, and security mechanisms. Liquid is a sidechain of Bitcoin that allows bitcoin to flow between the Liquid and Bitcoin networks with a two-way peg. A representation of bitcoin used in the Liquid network is referred to as L-BTC. Its verifiably equivalent amount of BTC is managed and secured by the network’s members, called functionaries.
“Digital securities law will enable El Salvador to be the financial center of central and south America,” wrote Paolo Ardoino, CTO of cryptocurrency exchange Bitfinex, on Twitter.
Bitfinex is set to be granted a license in order to be able to process and list the bond issuance in El Salvador.
The bonds will pay a 6.5% yield and enable fast-tracked citizenship for investors. The government will share half the additional gains with investors as a Bitcoin Dividend once the original $500 million has been monetized. These dividends will be dispersed annually using Blockstream’s asset management platform.
The act of submitting the bill, which was hinted at earlier this year, kickstarts the first major milestone before the bonds can see the light of day. The next is getting it approved, which is expected to happen before Christmas, a source close to President Nayib Bukele told Bitcoin Magazine. The bill was submitted on November 17 and presented to the country’s Congress today. It is embedded in full below.
This is an opinion editorial by Joakim Book, a Research Fellow at the American Institute for Economic Research, contributor and copy editor for Bitcoin Magazine and a writer on all things money and financial history.
I don’t.
That’s it. That’s the article.
In all sincerity, that is the full message: Just don’t do it. It’s not worth it.
You’re not an excited teenager anymore, in desperate need of bragging credits or trying out your newfound wisdom. You’re not a preaching priestess with lost souls to save right before some imminent arrival of the day of reckoning. We have time.
Instead: just leave people alone. Seriously. They came to Thanksgiving dinner to relax and rejoice with family, laugh, tell stories and zone out for a day — not to be ambushed with what to them will sound like a deranged rant in some obscure topic they couldn’t care less about. Even if it’s the monetary system, which nobody understands anyway.
Get real.
If you’re not convinced of this Dale Carnegie-esque social approach, and you still naively think that your meager words in between bites can change anybody’s view on anything, here are some more serious reasons for why you don’t talk to friends and family about Bitcoin the protocol — but most certainly not bitcoin, the asset:
- Your family and friends don’t want to hear it. Move on.
- For op-sec reasons, you don’t want to draw unnecessary attention to the fact that you probably have a decent bitcoin stack. Hopefully, family and close friends should be safe enough to confide in, but people talk and that gossip can only hurt you.
- People find bitcoin interesting only when they’re ready to; everyone gets the price they deserve. Like Gigi says in “21 Lessons:”
“Bitcoin will be understood by you as soon as you are ready, and I also believe that the first fractions of a bitcoin will find you as soon as you are ready to receive them. In essence, everyone will get ₿itcoin at exactly the right time.”
It’s highly unlikely that your uncle or mother-in-law just happens to be at that stage, just when you’re about to sit down for dinner.
- Unless you can claim youth, old age or extreme poverty, there are very few people who genuinely haven’t heard of bitcoin. That means your evangelizing wouldn’t be preaching to lost, ignorant souls ready to be saved but the tired, huddled and jaded masses who could care less about the discovery that will change their societies more than the internal combustion engine, internet and Big Government combined. Big deal.
- What is the case, however, is that everyone in your prospective audience has already had a couple of touchpoints and rejected bitcoin for this or that standard FUD. It’s a scam; seems weird; it’s dead; let’s trust the central bankers, who have our best interest at heart.
No amount of FUD busting changes that impression, because nobody holds uninformed and fringe convictions for rational reasons, reasons that can be flipped by your enthusiastic arguments in-between wiping off cranberry sauce and grabbing another turkey slice. - It really is bad form to talk about money — and bitcoin is the best money there is. Be classy.
Now, I’m not saying to never ever talk about Bitcoin. We love to talk Bitcoin — that’s why we go to meetups, join Twitter Spaces, write, code, run nodes, listen to podcasts, attend conferences. People there get something about this monetary rebellion and have opted in to be part of it. Your unsuspecting family members have not; ambushing them with the wonders of multisig, the magically fast Lightning transactions or how they too really need to get on this hype train, like, yesterday, is unlikely to go down well.
However, if in the post-dinner lull on the porch someone comes to you one-on-one, whisky in hand and of an inquisitive mind, that’s a very different story. That’s personal rather than public, and it’s without the time constraints that so usually trouble us. It involves clarifying questions or doubts for somebody who is both expressively curious about the topic and available for the talk. That’s rare — cherish it, and nurture it.
Last year I wrote something about the proper role of political conversations in social settings. Since November was also election month, it’s appropriate to cite here:
“Politics, I’m starting to believe, best belongs in the closet — rebranded and brought out for the specific occasion. Or perhaps the bedroom, with those you most trust, love, and respect. Not in public, not with strangers, not with friends, and most certainly not with other people in your community. Purge it from your being as much as you possibly could, and refuse to let political issues invade the areas of our lives that we cherish; politics and political disagreements don’t belong there, and our lives are too important to let them be ruled by (mostly contrived) political disagreements.”
If anything, those words seem more true today than they even did then. And I posit to you that the same applies for bitcoin.
Everyone has some sort of impression or opinion of bitcoin — and most of them are plain wrong. But there’s nothing people love more than a savior in white armor, riding in to dispel their errors about some thing they are freshly out of fucks for. Just like politics, nobody really cares.
Leave them alone. They will find bitcoin in their own time, just like all of us did.
This is a guest post by Joakim Book. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
This is an opinion editorial by Federico Tenga, a long time contributor to Bitcoin projects with experience as start-up founder, consultant and educator.
The term “smart contracts” predates the invention of the blockchain and Bitcoin itself. Its first mention is in a 1994 article by Nick Szabo, who defined smart contracts as a “computerized transaction protocol that executes the terms of a contract.” While by this definition Bitcoin, thanks to its scripting language, supported smart contracts from the very first block, the term was popularized only later by Ethereum promoters, who twisted the original definition as “code that is redundantly executed by all nodes in a global consensus network”
While delegating code execution to a global consensus network has advantages (e.g. it is easy to deploy unowed contracts, such as the popularly automated market makers), this design has one major flaw: lack of scalability (and privacy). If every node in a network must redundantly run the same code, the amount of code that can actually be executed without excessively increasing the cost of running a node (and thus preserving decentralization) remains scarce, meaning that only a small number of contracts can be executed.
But what if we could design a system where the terms of the contract are executed and validated only by the parties involved, rather than by all members of the network? Let us imagine the example of a company that wants to issue shares. Instead of publishing the issuance contract publicly on a global ledger and using that ledger to track all future transfers of ownership, it could simply issue the shares privately and pass to the buyers the right to further transfer them. Then, the right to transfer ownership can be passed on to each new owner as if it were an amendment to the original issuance contract. In this way, each owner can independently verify that the shares he or she received are genuine by reading the original contract and validating that all the history of amendments that moved the shares conform to the rules set forth in the original contract.
This is actually nothing new, it is indeed the same mechanism that was used to transfer property before public registers became popular. In the U.K., for example, it was not compulsory to register a property when its ownership was transferred until the ‘90s. This means that still today over 15% of land in England and Wales is unregistered. If you are buying an unregistered property, instead of checking on a registry if the seller is the true owner, you would have to verify an unbroken chain of ownership going back at least 15 years (a period considered long enough to assume that the seller has sufficient title to the property). In doing so, you must ensure that any transfer of ownership has been carried out correctly and that any mortgages used for previous transactions have been paid off in full. This model has the advantage of improved privacy over ownership, and you do not have to rely on the maintainer of the public land register. On the other hand, it makes the verification of the seller’s ownership much more complicated for the buyer.
Source: Title deed of unregistered real estate propriety
How can the transfer of unregistered properties be improved? First of all, by making it a digitized process. If there is code that can be run by a computer to verify that all the history of ownership transfers is in compliance with the original contract rules, buying and selling becomes much faster and cheaper.
Secondly, to avoid the risk of the seller double-spending their asset, a system of proof of publication must be implemented. For example, we could implement a rule that every transfer of ownership must be committed on a predefined spot of a well-known newspaper (e.g. put the hash of the transfer of ownership in the upper-right corner of the first page of the New York Times). Since you cannot place the hash of a transfer in the same place twice, this prevents double-spending attempts. However, using a famous newspaper for this purpose has some disadvantages:
- You have to buy a lot of newspapers for the verification process. Not very practical.
- Each contract needs its own space in the newspaper. Not very scalable.
- The newspaper editor can easily censor or, even worse, simulate double-spending by putting a random hash in your slot, making any potential buyer of your asset think it has been sold before, and discouraging them from buying it. Not very trustless.
For these reasons, a better place to post proof of ownership transfers needs to be found. And what better option than the Bitcoin blockchain, an already established trusted public ledger with strong incentives to keep it censorship-resistant and decentralized?
If we use Bitcoin, we should not specify a fixed place in the block where the commitment to transfer ownership must occur (e.g. in the first transaction) because, just like with the editor of the New York Times, the miner could mess with it. A better approach is to place the commitment in a predefined Bitcoin transaction, more specifically in a transaction that originates from an unspent transaction output (UTXO) to which the ownership of the asset to be issued is linked. The link between an asset and a bitcoin UTXO can occur either in the contract that issues the asset or in a subsequent transfer of ownership, each time making the target UTXO the controller of the transferred asset. In this way, we have clearly defined where the obligation to transfer ownership should be (i.e in the Bitcoin transaction originating from a particular UTXO). Anyone running a Bitcoin node can independently verify the commitments and neither the miners nor any other entity are able to censor or interfere with the asset transfer in any way.
Since on the Bitcoin blockchain we only publish a commitment of an ownership transfer, not the content of the transfer itself, the seller needs a dedicated communication channel to provide the buyer with all the proofs that the ownership transfer is valid. This could be done in a number of ways, potentially even by printing out the proofs and shipping them with a carrier pigeon, which, while a bit impractical, would still do the job. But the best option to avoid the censorship and privacy violations is establish a direct peer-to-peer encrypted communication, which compared to the pigeons also has the advantage of being easy to integrate with a software to verify the proofs received from the counterparty.
This model just described for client-side validated contracts and ownership transfers is exactly what has been implemented with the RGB protocol. With RGB, it is possible to create a contract that defines rights, assigns them to one or more existing bitcoin UTXO and specifies how their ownership can be transferred. The contract can be created starting from a template, called a “schema,” in which the creator of the contract only adjusts the parameters and ownership rights, as is done with traditional legal contracts. Currently, there are two types of schemas in RGB: one for issuing fungible tokens (RGB20) and a second for issuing collectibles (RGB21), but in the future, more schemas can be developed by anyone in a permissionless fashion without requiring changes at the protocol level.
To use a more practical example, an issuer of fungible assets (e.g. company shares, stablecoins, etc.) can use the RGB20 schema template and create a contract defining how many tokens it will issue, the name of the asset and some additional metadata associated with it. It can then define which bitcoin UTXO has the right to transfer ownership of the created tokens and assign other rights to other UTXOs, such as the right to make a secondary issuance or to renominate the asset. Each client receiving tokens created by this contract will be able to verify the content of the Genesis contract and validate that any transfer of ownership in the history of the token received has complied with the rules set out therein.
So what can we do with RGB in practice today? First and foremost, it enables the issuance and the transfer of tokenized assets with better scalability and privacy compared to any existing alternative. On the privacy side, RGB benefits from the fact that all transfer-related data is kept client-side, so a blockchain observer cannot extract any information about the user’s financial activities (it is not even possible to distinguish a bitcoin transaction containing an RGB commitment from a regular one), moreover, the receiver shares with the sender only blinded UTXO (i. e. the hash of the concatenation between the UTXO in which she wish to receive the assets and a random number) instead of the UTXO itself, so it is not possible for the payer to monitor future activities of the receiver. To further increase the privacy of users, RGB also adopts the bulletproof cryptographic mechanism to hide the amounts in the history of asset transfers, so that even future owners of assets have an obfuscated view of the financial behavior of previous holders.
In terms of scalability, RGB offers some advantages as well. First of all, most of the data is kept off-chain, as the blockchain is only used as a commitment layer, reducing the fees that need to be paid and meaning that each client only validates the transfers it is interested in instead of all the activity of a global network. Since an RGB transfer still requires a Bitcoin transaction, the fee saving may seem minimal, but when you start introducing transaction batching they can quickly become massive. Indeed, it is possible to transfer all the tokens (or, more generally, “rights”) associated with a UTXO towards an arbitrary amount of recipients with a single commitment in a single bitcoin transaction. Let’s assume you are a service provider making payouts to several users at once. With RGB, you can commit in a single Bitcoin transaction thousands of transfers to thousands of users requesting different types of assets, making the marginal cost of each single payout absolutely negligible.
Another fee-saving mechanism for issuers of low value assets is that in RGB the issuance of an asset does not require paying fees. This happens because the creation of an issuance contract does not need to be committed on the blockchain. A contract simply defines to which already existing UTXO the newly issued assets will be allocated to. So if you are an artist interested in creating collectible tokens, you can issue as many as you want for free and then only pay the bitcoin transaction fee when a buyer shows up and requests the token to be assigned to their UTXO.
Furthermore, because RGB is built on top of bitcoin transactions, it is also compatible with the Lightning Network. While it is not yet implemented at the time of writing, it will be possible to create asset-specific Lightning channels and route payments through them, similar to how it works with normal Lightning transactions.
Conclusion
RGB is a groundbreaking innovation that opens up to new use cases using a completely new paradigm, but which tools are available to use it? If you want to experiment with the core of the technology itself, you should directly try out the RGB node. If you want to build applications on top of RGB without having to deep dive into the complexity of the protocol, you can use the rgb-lib library, which provides a simple interface for developers. If you just want to try to issue and transfer assets, you can play with Iris Wallet for Android, whose code is also open source on GitHub. If you just want to learn more about RGB you can check out this list of resources.
This is a guest post by Federico Tenga. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
