The first Bitcoin Africa Conference in Cape Town on 16 and 17 April was a big success. It brought together an impressive line-up of speakers, including Gyft co-founder Vinny Lingham and Bitcoin Foundation board member Brick Peirce to name but two. The conference was held overlooking the Waterfront with its fishing boats, seals and sailing ships. Some recurring themes and words during these two days: remittances, emerging markets, mobile, AML, regulation, Ethereum, the unbanked, and the difficulty for bitcoin companies to open a bank account.
Jonathan Levin, currently VP of Business Development at Chainalysis and previously CEO and co-founder of Coinometrics, gave an insightful introduction to bitcoin. It went beyond the basics and as such was interesting both for those joining the conference to learn about bitcoin and those already knowing what it is about. He would also provide interesting questions and insights during other speakers’ Q&As throughout the conference.
Vinny Lingham, South African now living in Silicon Valley and co-founder of Gyft, was the keynote speaker of the conference. When Gyft started accepting bitcoin for buying digital gift cards in 2013 it made it possible to (indirectly) spend bitcoin at Amazon, iTunes and a number of American brick and mortar shops. While the percentages of Gyft clients using bitcoin declined relatively from 50% in 2014 to 20% in 2015, the number grew in absolute terms. According to Vinny there is no industry demand for bitcoin, unlike gold for instance, which is needed in industrial production. The bitcoin price is purely speculative because of this lack of industry demand. An example of an industrial use case for bitcoin is storing contracts in the blockchain in stead of in private data silo’s. This would create industry demand and is something Gyft plans to do in the future.
Micah Winkelspecht is CEO and founder of Gem, a bitcoin wallet and platform for blockchain developers. He sees bitcoin as the operating system for distributed applications. Although the bitcoin protocol by itself is very safe, wallets aren’t, with 10% of all bitcoin mined getting lost or stolen. Using multi-signature is one solution Gem is putting forward, the client having one key, the other one stored by Gem. Another security measure is private key security in the form of FIPS certified hardware, which is commonly used in banking for which Gem is working together with Thales.
Sean Emery, CEO and co-founder of on-line peer-to-peer lender RainFin set out to “completely disrupt the banking industry”. The biggest chunk of banking revenue (65%) comes from net interest and a second one (10%) from services charges, mainly transaction fees. The combination of peer-to-peer lending and cryptocurrencies could take away the need for banks providing loans or storing and moving value. The biggest challenges are trust and liquidity. Banks are trusted by their customers, for peer-to-peer lenders it is hard to gain such trust. Banks also hold a lot of liquidity where RainFin has a lending problem: there is more need for loans then offers.
Erik Wilgenhof Plante is a compliance officer who held senior roles in big banks and PayPal and talked about the importance of rules and regulations for the development of virtual currencies. He put forward the statistic of 48% of e-commerce in Africa and the Middle-East being cash on delivery. It’s an example of these regions having a digital, mainly mobile, infrastructure but no banking infrastructure. He also showed how fraud isn’t a typical bitcoin thing with money laundering via fake apps in the Apple app store and eBay/PayPal fraud with stolen credit cards. The upcoming BitLicense in New York is a good thing according to Erik, as regulation will benefit the bitcoin space. If there are regulated and unregulated bitcoin businesses, the unregulated ones will be pushed out. And once the US have their own regulation even non-US companies will be forced to comply with it if they want access to the US market.
Elizabeth Rossiello is CEO and co-founder of BitPesa, a remittance platform using bitcoin to send money to East Africa. She spoke of BitPesa as a real live use case, providing a cheaper and easier way to send money internationally. Customers send bitcoin which are exchanged for Kenyan Shillings and sent to a mobile money wallet like M–Pesa. Being based in Kenya herself Elizabeth has the experience of bank cards not being accepted while traveling. African banking is very inconvenient with slow and unreliable transactions, involving a lot of phone calls. There is a big market though: 35 billion Dollars of retail transfer in Africa, and this with only 3% access to credit cards. She doesn’t like the term “the unbanked” though, as anyone who has a SIM card can get a mobile wallet.
Jonathan Swift, managing director and founder of PayFast, a South African payments processing service, spoke about their recently roll out of bitcoin payments. Some of the reasons for PayFast integrating bitcoin payments were the press coverage it got and the total elimination of the risk of charge backs associated with credit cards. Of the 127 of the merchants with at least one bitcoin customer, the main part are tech related. TakeAlot.com for instance, a large South-African e-shop specialized in electronics, asked to switch on bitcoin payments after a lot of customers asked for it on Twitter. In the first week PayFast handled 5 transaction totaling about 50.000 Rand, which has been consistent since, with 2% of value and 1% of volume being bitcoin. They use BitX to convert to South-African Rand instantly, so merchants don’t even notice if a customer pays with bitcoin.
Daniel Schartzkopff, managing director and founder of BitVIP, a bitcoin licensed on-line sports betting service, gave an interesting insight into iGaming and cryptocurrencies. BitVIP operates purely on bitcoin and has a turnover of about 1.000 BTC per month. They chose to comply with upcoming United States AML and KYC requirements to prepare for the future and for the visibility offered by being “the world’s first licensed bitcoin sportsbook”. Removing credit card fees means lower overhead ans a better price for customers, which is a big advantage in the competitive iGaming market. Gambling site are often faced with fraudulent cash-backs, which are completely eliminated with bitcoin. Faces daily hacking attempts, one security measure is to have support staff manually approve any withdrawal. BitVip pays its employees in bitcoin, which makes Daniel an avid user himself, when he travels he uses LocalBitcoins.com to exchange bitcoin for local currency.
Lorien Gamaroff, founder and CEO of Bankymoon talked about a blockchain aware smart metering solution as “bitcoin’s first killer app”. A smart grid is the internet of things applied to the electricity, water or gas grid. Advantages are the possibility to forecast usage (and possibly reduce load shedding, common in South Africa), detecting tampering with meters from a distance, and accurately and timely billing customers. Paying for usage with bitcoin is more convenient and cheaper than other forms of payment. The live demo of turning on a lamp with a bitcoin payment by an audience member was quite impressive. Bankymoon is looking for funding and wants to assist companies in rolling out this type of smart metering worldwide. They also want to integrate smart contracts such as Etereum into the mix.
Gareth Grobler, founder of South Africa’s second biggest bitcoin exchange ICE3X.com (pronounced ice-cubed) gave his view on new entrants and disruptors. Putting bitcoin as a currency versus as a technology, he isn’t very big on it’s short term prospects of bitcoin replacing other forms of payment. Customer adoption is slowing down, people aren’t very willing to change their ways and are used to internet banking and credit cards. The lack of regulation means there is no guidance and results in bitcoin companies not being able to get a bank account. ICE3 is rolling out a proof of existence (POE) solution via the blockchain aimed at the African mining industry. To prevent documents such as contracts from disappearing or being unlawfully changed, proof of their existence is written into the blockchain.
Simon Dingle, head of product design at BitX, South Africa’s biggest bitcoin exchange, presented “bitcoin, present and future”. As a designer and “excited nerd” he found the bitcoin experience not as elegant as the technology. BitX’s recent make-over is trying to improve that. He puts bitcoin on the Gartner technology adoption lifecycle at the end of the early adopter stage and on the Hype Cycle he sees it just before the “Slope of Enlightenment”. Africa is a mobile first (or even mobile only) continent and with mobile being like a Pacman, gobbling up every other technology, Simon thinks your wallet is next. He also briefly mentioned BitX’s project Falcon, which proposes an open source specification for remittances. The blockchain removing the need for prior agreement when doing financial transactions from fiat to fiat currency.
Brock Pierce, investor in numerous “blockchain enabled” companies, came to shed his light on bitcoin investments. He split his own investments 50/50 between bitcoin and alt-coins as currency and bitcoin equities, companies using blockchain technology. He sees the real possibility of bitcoin not in the US, where it isn’t needed as much, but in the developing world, which has the possibility to leapfrog like it did with mobile. For instance: only 3% of Filipinos has a credit card, but the government could put the national currency on the blockchain at almost no cost. He sees possibilities for bitcoin in unstable markets such as Africa, in countries with currency constraints, in remittance, and in micro-transactions. There is a need for investment in basic banking infrastructure in Africa, providing “last mile” access, BitPesa (in which he invested) proves bitcoin can provide this.
Theo Saul, co-organizers of the conference, is also organiser of the Bitcoin Cape Town Meetup, which hasn’t been very active lately, but will get a reboot in the coming month. The conference was a great opportunity for networking, with attendance from some of the big South African banks, South African regulators and key industry players. I heard nothing but praise and hopefully this will be the first of many more bitcoin conferences on the African continent.