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Crypto-currencies and Blockchain

Most Common Bitcoin Myths Busted

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Marius Reitz, Luno’s GM for Africa, unpacks the most common misconceptions and questions about Bitcoin. 

Bitcoin has smashed through all-time price highs in 2021 – and many other cryptocurrencies have too. Many people hold strong views – that Bitcoin is a scam, a crashing bubble and that it has no intrinsic value at all. What is all the fuss about? Is it just a passing fad or the future of money?

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A longer term view of Bitcoin performance

Only time will tell whether Bitcoin will continue to surge or not. For now, however, it may be useful to take a longer term view of Bitcoin’s performance. What is evident is that reports of the demise of Bitcoin seem to have been greatly exaggerated. 

 Many former naysayers are now dipping into Bitcoin and other cryptocurrencies and adoption rates continue to rise. JP Morgan, one of the largest investment banks in the US, indicated that while more than $3 billion had flowed into the Grayscale Bitcoin Trust in the last quarter of 2020, gold ETFs had bled $7 billion over the same period.

 Bitcoin is a monetary network. When the concept of electricity being used to power appliances in the home was introduced, it wasn’t considered a bubble but an engineering breakthrough. There will always be people who are afraid of progress.

 Myth: With wild volatility, you can’t take Bitcoin seriously

Many have declared Bitcoin dead (or dying), simply based on the latest changes in the price. The technology that drives cryptocurrencies like Bitcoin is one of the most important financial innovations of our time and the current price of Bitcoin has nothing to do with the long-term value that cryptocurrencies will bring.

 If you’re a trader, the volatility can be stressful and potentially profitable, but if you believe in Bitcoin as the future of money, your investment objectives are long-term and therefore short-term volatility matters less to you.

 Volatility has decreased over time and the market is stabilising. Michael Saylor, CEO of MicroStrategy, who led the charge when his listed company elected to keep a significant portion of its treasury reserve in Bitcoin, has an interesting view of volatility: “Things that are dead are not volatile. Stability is stagnation. Living things are volatile.” 

 Myth: Bitcoin has no intrinsic value 

This thinking could be applied to any currency. If people stopped believing in the dollar, it would also have no value. The price of Bitcoin is determined by supply and demand: the buyers who want Bitcoin and the sellers who have Bitcoin. 

 The reason Bitcoin has value is that it is a handy form of value or money commonly accepted by people. It is used to transfer value and buy or sell things. Unlike fiat currency – like the US dollar or the rand – where its value and legal status are enforced by the government, Bitcoin’s value comes from its code, infrastructure, scarcity (there will only ever be 21 million) and adoption. By upgrading the financial system, Bitcoin empowers people. 

 Bitcoin has grown exponentially and has surpassed a market cap of $1 trillion, yet this is still relatively small as an asset class.

 In the context of the constant devaluation of fiat currencies, people are looking for ways to protect their wealth, including governments. Bitcoin is set to disrupt the world of money in the same way the internet disrupted everything a few years ago. Many believe that it is the future of money.

 Myth: Bitcoin cannot be a currency, investment, and a store of value

To be termed a currency, Bitcoin would need to be divisible, scarce, durable, transferable and fungible (can be exchanged for the same value or type). It meets all of these requirements – one Bitcoin divides into units as small as one hundred millionth; it is scarce as the total supply is limited to 21 million Bitcoin; it is durable in that it it doesn’t exist in physical form so it cannot wear out; Bitcoin is digital so you can transfer it to anyone, anywhere in moments and finally, any particular Bitcoin is equal in value to any other Bitcoin.

 Bitcoin crosses many lines: it can be used for payment, like a currency; it can be used as a store of value since it has controlled supply, like gold or other commodities; and it derives more value and utility from developers who improve the code and ways it can be used.

 This multifaceted aspect of Bitcoin makes it tricky to decide whether it should be treated as an asset, as a currency, as a payment mechanism or as an open, global technology. Regulators grapple with this as they decide how it should be treated. 

 Myth: Bitcoin is a Ponzi or pyramid scheme

A pyramid scheme recruits members by promising them payment or rewards for enrolling others. A Ponzi scheme is very similar to a pyramid scheme, with the difference that you are not rewarded for enrolling other people. Instead, you earn a part of whatever recruits pay. 

 Bitcoin operates on a decentralised model with no hierarchy. There is no reward for buying coins nor are there guaranteed returns. In addition, the blockchain on which Bitcoin is built is entirely transparent; anyone, at any time, can inspect the public ledger. If you are considering investing in Bitcoin, increase your knowledge on Luno’s free learning portal

 Big companies like PayPal and Tesla entering the crypto space, as well as listings like the Coinbase exchange on the Nasdaq, should help to end this myth.

 Myth: Bitcoin is only used by criminals

People found a way to carry out illegal activities, long before Bitcoin existed – they always will. But criminal use of crypto has shrunk dramatically over the past few years. In fact, cryptocurrency-related crime fell significantly during 2020, according to the latest Chainalysis report. In 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume whereas in 2020, the criminal share of all cryptocurrency activity fell to just 0.34%. 

 Although Bitcoin is pseudo-anonymous in that it cannot be immediately linked to one’s identity, Bitcoin is actually a terrible choice for carrying out anything illegal. Once your identity is linked to Bitcoin, your entire history is available and movements are far easier to trace than cash as blockchain technology is a public ledger.

 As Bitcoin continues to gain legitimacy and use cases, data and law enforcement is getting better at tracing transactions to search for criminal uses and figuring out to whom an address belongs. 

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Crypto-currencies and Blockchain

Cryptocurrency: Binance Introduces Crypto Price Widget

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Binance has announced the introduction of the Binance Crypto Price Widget as part of its ongoing effort to make cryptocurrency trading both more accessible and more widely understood.

The Binance Crypto Price widget is an easy to install, easily integrated tool that provides value to website visitors by sharing live, reliable updates on top cryptocurrency prices from the largest cryptocurrency exchange in the world.

“Websites benefit from the widget because it offers an engaging, interactive experience for visitors,” points out Binance’s Director in West & East Africa, Nadeem Anjarwalla. He further explains that the widget delivers news around prices, data and developments in the crypto world. “By providing this information, visitors are encouraged to spend more time on the site. But, more than this, because the information is credible and reliable, the website gains a reputation for credibility and reliability, too. In this way, it is able to build an audience who are regular to check in regularly with a source they trust.”

The information on offer is extremely comprehensive, offering live prices of up to 10 cryptocurrencies as well as fiat currencies. The widget is flexible, too, with website owners able to choose a customizable price, while the appearance can also be customized to match the website design and branding. Owners can also choose to integrate the widget as a ticker providing real-time feeds, or a blog.

Anjarwalla says that the widget can be installed directly onto a website with just a few clicks, starting with a visit to the Binance Crypto Price Widget page. “From there, website owners choose the appropriate code and paste it onto the location on their own website where they would like visitors to access it.”

The benefits for visitors are clear, too: having access to up-to-the-minute information for the most popular cryptocurrencies, from the world’s largest cryptocurrency, is a major advantage for those wishing to build their crypto portfolio.

“We realise that, for many would-be investors, the world of crypto remains difficult to understand and somewhat daunting. Tools like the Binance Crypto Price Widget have been made available specifically to change this mindset and to make investing more simple for everyone,” Anjarwalla concludes.

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Crypto-currencies and Blockchain

Mastercard and Web3 Players Join Forces on Blockchain Transactions Trust

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Mastercard is teaming up with Web3 players on an on-chain identity and verification framework covering a variety of applications in payments, remittances, ticketing and NFTs.

Mastercard Crypto Credential is designed to help companies, developers, and individuals to realise the full potential of powering payments, commerce, and economic value on-chain and across borders.

Among the partners onboard are crypto wallet providers Bit2Me, Lirium, Mercado Bitcoin and Uphold, which are working on an initial project to enable transfers between the US and Latin America and the Caribbean corridors.

The company is also teaming up with public blockchain network organisations Aptos Labs, Ava Labs, Polygon and The Solana Foundation. Aptos says it is among the shortlist of blockchains to enable the identity and attestation element of sending and receiving funds through Web3.

The partners also intend to explore the utility of identity-oriented Web3 solutions use cases like NFTs, ticketing, enterprise, and payments.

Raj Dhamodharan, EVP, digital asset and blockchain product and partnerships, Mastercard, says: “With Mastercard Crypto Credential, we can help ensure that those interested in interacting across Web3 environments are meeting defined standards for the types of activities they’d like to pursue.

“Mastercard Crypto Credential will not only define verification standards and levels, but also provide necessary enabling technology to help bring more use cases to life.”

Separately, Mastercard has signed up another six blockchain and digital asset startups for its StartPath programme, giving participants training, access to channels and customers as well as subject matter expertise, and an opportunity for technical collaboration. The new members are Axelar, Cheeze, Coala Pay, Qonbay.io, RociFi Labs and Suberra.

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Crypto-currencies and Blockchain

As currency devaluation impacts African consumers, Stablecoins offer a safe and reliable alternative

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In recent years, many countries across Africa have been grappling with the growing challenge of currency devaluation. Currency devaluation refers to the decline in the value of a country’s currency relative to other currencies in the world. It can be caused by various internal or external factors. For example, weak economic fundamentals, such as high inflation, low GDP growth, high levels of debt or low foreign reserves, can erode investor confidence and lead to a decrease in demand for the currency, resulting in it losing value. 

According to Nadeem Anjarwalla, Director for Binance in West & East Africa, while currency devaluation can be used as a tool by governments to boost exports, stimulate economic growth, or reduce trade deficits, it can also have negative consequences for the economy and people of the country concerned. 

“Currency devaluation can erode the purchasing power of people’s money, cause inflation levels and the costs of living to increase, and create uncertainty in financial markets,” Anjarwalla explains, “all of which can result in reduced standards of living for consumers and less certainty when it comes to growing their money through traditional savings and investment vehicles.”

However, Anjarwalla points out that there is a solution to the challenge of currency devaluation and the impacts that a declining currency can have on people’s financial well-being. “Stablecoins provide a practical solution for African consumers to hedge against the currency devaluation that many countries on the continent are facing,” he explains, “by offering a stable way of growing the value of their money, easy digital access to their funds, and a steadily increasing number of opportunities to use Stablecoins to do secure cashless transactions.”

Stablecoins are a type of cryptocurrency that is pegged to a stable asset, like a traditional currency such as the US dollar, or a commodity like gold. This allows Stablecoins to maintain steady value and be less susceptible to the volatility often associated with other cryptocurrencies. These attributes make Stablecoins a reliable hedge against currency devaluation, even in uncertain economic conditions. 

“One of the most valuable aspects of Stablecoins in an environment of currency devaluation is that they offer a secure and efficient means of saving and growing money, making them a reliable option for long-term savings,” Anjarwalla explains, “So, African consumers can save their money in Stablecoins, secure in the knowledge that its value will remain relatively stable over time, and even have the potential to grow, regardless of the fluctuations happening in their country’s local currency.”

And the benefits of Stablecoins are not limited to their savings potential. They also offer fast and low-cost cross-border payments and transfers, making them a convenient option for remittances and international transactions. “African consumers can use Stablecoins to send and receive money across borders quickly and efficiently,” Anjarwalla says, “without being faced with a situation where currency devaluation in the recipient’s country means that the money is worth less when it reaches its destination.”

Anjarwalla points to the convenience and accessibility of Stablecoins as another compelling reason why growing numbers of consumers in Africa are turning to these innovative currencies to enhance their financial resilience in difficult economic times. “People can easily convert their local currency into Stablecoins through peer-to-peer exchanges or decentralised finance (DeFi) platforms,” he says, “ and they can then easily access their Stablecoins through cryptocurrency exchanges, like Binance (Binance.com), which provide a user-friendly platform for buying, selling, and trading the coins. What’s more, an increasing number of fintech companies in Africa are incorporating Stablecoins into their payment systems, enabling consumers to transact directly with them to pay bills, invest, and purchase everyday goods and services.” 

He points out that, as the demand for Stablecoins continues to grow in Africa, leading cryptocurrency exchanges, like Binance, are actively supporting their adoption on the continent as a viable way to counteract growing economic uncertainty and ongoing currency devaluation. “As one of the largest cryptocurrency exchanges in the world, Binance offers a wide range of Stablecoins, including Binance USD (BUSD), Tether (USDT), USD Coin, TrueUSD, and Dai (DAI),” he says, “which are pegged to the US dollar and provide a reliable hedge against currency devaluation for African consumers.” 

“By providing a secure and convenient platform for buying, selling, and using Stablecoins, Binance is not only offering African consumers a reliable and accessible option to safeguard their financial future by countering the negative impacts of currency devaluation,” Anjarwalla says, “but we are also contributing to greater financial inclusion and economic empowerment and resilience on the continent.”

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