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Demystifying Cryptocurrency

Demystifying Cryptocurrency

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The next dimension of  financial services is wrapped up in cryptocurrency.

Background

I have always been passionate about using technology to improve the way we do things. My career has been about improving the way people manage their finances. 

I worked in the banking sector on projects like Cashless Nigeria which is geared at promoting electronic banking and I helped design, manage and market payments and collections solutions. In my quest for the next best thing in the fintech space I learned about cryptocurrency. 

I was a skeptic at first, but became intrigued after studying a little about the technology behind cryptocurrency (the blockchain), understanding its compelling use cases and ability to solve major challenges in the financial space, as well as its ability to survive many premature predictions of failure. 

I am currently the Marketing and Community Lead for Luno Nigeria. It has been an exciting journey working with a truly phenomenal team to upgrade the world to a better financial system. 

Cryptocurrency as an Investment 

People are buying cryptocurrencies as they’re eager to make money from what many perceive to be a high-risk, high-performing asset in the hope that their prices will increase. However, they shouldn’t overexpose themselves. It’s important to spread a portfolio into different classes and risk categories and avoid putting all your money in a single investment. 

It’s also important to be aware that Bitcoin and other cryptocurrencies are exceptionally volatile. The media often sees these price dips or “bubbles bursting” as the “death of crypto” like Bitcoin, but this has now happened 377 times. It is vital to remember that these are not issues with Bitcoin or cryptocurrency, but rather irrational market behaviour. 

Impact of Cryptocurrency on the Nigerian economy 

One of the biggest opportunities for cryptocurrencies in Nigeria lies in financial inclusion. According to the CBN, Nigeria’s financial inclusion rate is just above 63% which is an improvement from 2016 (58%) but still leaves over a third of the population neglected by the current financial system. 

The decentralised nature of certain cryptocurrencies makes it a lot easier for consumers, especially those within the informal economy, to facilitate more trade and investments. While it’s hard to put an exact figure on how much wealth this part of the population could provide, traditional banks have been unable to onboard these customers for decades. I think the core characteristics of cryptocurrencies could change this. 

Cryptocurrency Myths  

One of the common myths is that cryptocurrencies are unsafe as they’re unregulated. Similar to most sectors, innovation is definitely moving ahead of regulation in the crypto space. In the meantime, companies are taking it upon themselves to ensure the right protection is in place. For example, 

stringent KYC (Know Your Customer) and AML (Anti Money Laundering) processes are measures that are critical for us at Luno as we want to provide a safe space for our customers. 

Equally, there’s a strong belief that regulation will stifle the progress of crypto adoption. If anything, it brings more clarity and protection which will help its transition to mainstream use. This is why it’s important for crypto firms to have a collaborative approach towards working with regulators as it will benefit them and their consumers in the long-run. 

Always be wary of anyone promising overnight wealth or unrealistic returns on a cryptocurrency investment. If it seems too good to be true, it’s probably a scam and you should simply walk away. 

About Luno  

Luno makes it safe and easy to buy, sell, store and learn about cryptocurrencies like Bitcoin, Bitcoin Cash and Ethereum. Our vision is to upgrade the world to a better financial system, we want to build the world’s most trusted gateway to the crypto economy. By 2030, we want to positively impact one billion lives. We currently have in excess of three million customers (wallets) across more than 40 countries across Europe, Africa and South East Asia. 

We recently announced that customers can now buy, sell and store Bitcoin Cash on our platform. We will soon be adding more coins to our platform, which will follow after extensive consultation with our customers and the wider community. We’re also working to increase awareness of the numerous benefits of cryptocurrencies across Africa and to create an environment that can bring about the development these economies need. 

Future of Cryptocurrency in Nigeria

In our recent Future of Money Report, which analysed attitudes towards money across seven countries including Nigeria, we found consumers in emerging markets wanted a change from the current financial system. With high transaction costs and ongoing currency devaluations, Nigerians consistently feel the negative impact of a system which was designed 75 years ago – and they want change. 

For example, our research shows that Nigerians are the most open to a single global currency; over one-third felt financially insecure. Cryptocurrencies like stablecoins, which are backed by fiat currencies like the US dollar, offer increased stability at a time where intra-African trade will become more important for the everyday Nigerian. This is further backed up by the fact that Nigeria has the highest number of searches for Bitcoin (according to Google Trends data) so there is huge interest among the population. 

Diversifying with Cryptocurrency 

As an asset, cryptocurrencies like Bitcoin mirror the qualities of gold. Firstly, similar to gold, Bitcoin is rare which increases its value. Secondly, it’s malleable and can be broken down into smaller units without losing its value – this doesn’t tend to be the case with other assets like diamonds. Equally, Bitcoin is stable, doesn’t degrade, is easy to recognise and difficult to counterfeit. Bitcoin’s qualities as a payment system provide it with even more value. The more people use Bitcoin this way, the more valuable it becomes. 

Safety of Crypto Investments

We encourage everyone to do their own research and due diligence before buying. Bitcoin, for example, has some fairly unique risks. It’s a brand new technology and while it appears very secure 

and robust, there is always a chance that it may still fail. Equally, during violent market movements, misinformation may be spread in the news which you should always be wary of. Ultimately, consumers should never risk inappropriate amounts of money and never invest more than they can afford to lose. 

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