Bitcoin should be used as value in barter agreements in Africa

Can cryptocurrency be used as value or price in Barter agreements? My goal at the end of the article is to encourage more Africans to use Bitcoin as a form of value in their barter agreements. To better understand the concept, let’s start with the definitions of the word; Barter and Cryptocurrency. Webster’s dictionary defines barter as trading goods or services between two or more parties without using money – or a monetary medium, such as a credit card. In essence, bartering involves the provision of one good or service by one party in return for another good or service from another party. 

According to Wikipedia, a cryptocurrency or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it. To further understand the concept, let’s divulge further into cryptocurrency and its examples. Cryptocurrency, as earlier defined, is the digital currency designed to work as a medium of exchange for services or goods rendered. There are different forms of cryptocurrencies. They include Bitcoin, and others, also known as alter coins, are Litecoin, Peercoin Namecoin, Ethereum, and Cardano. 

The most common, well-known, and successful cryptocurrency in Africa is Bitcoin. What makes Bitcoin the most popular and powerful cryptocurrency? Bitcoin was the first cryptocurrency in the world. In an article written by Rohan Mathawan on the future of Bitcoin, he noted that Bitcoin as digital money provides many benefits that include a secure and fast way to transact money, allowing you to trade securely, and offering a form of transparency and a wise future investment. 

In another article in Digital News on March 2021, Bitcoin is said to be the most profitable currency because; the market is free. This is because many exchanges take place without any regulations, it is completely transaction free, and you can trade any amount whenever you want. Secondly, there is less risk for buyers because very little personal data is shared between buyers; thirdly, there is no involvement of 3rd parties or middlemen, making the transaction transparent. 

Fourthly, this has made international payments easier as there are no trans-border charges; hence small companies can offer services across borders without fearing high cross-border charges/taxes. Lastly delivers a safe environment for the storage of cryptocurrencies in virtual wallets. Bitcoin as a virtual currency is slowly gaining popularity in Africa as most adults have smartphones. Since the internet is becoming readily available, interest rates charged by companies that wire currencies are becoming high, and more and more small companies are venturing into cross-border service and goods delivery. Most young people don’t want to share personal data with financial institutions, so Bitcoin offers a solution to the differences between currencies in African countries. 

Other factors that have led Bitcoin to gain popularity in Africa include the following:

• Political instability in countries making Africans fear saving money in financial institutions
• Unstable financial institutions or banks
• Job opportunities as virtual/remote employees for Western companies making payments virtual or digital payments. 

Can cryptocurrency be accepted as a form of value in barter agreements? Yes, barter is an accepted way of commerce in Africa and most African communities. How does it work? Two individuals have items each other wants. They agree on the value of items and provide amounts that result in an optimum allocation of resources. 

For instance, a child who goes to school with a sack of maize in exchange for services they will receive from the school for the entire year or a carpenter who agrees to accept a goat from a farmer for building a goat shed. In the above examples, the goat and the sack of maize are a payment between two parties (farmer and carpenter, and the child and school). No central authority upholds the agreements without physical money, and the exchange is done physically. Think about the same transactions happening across borders, e.g. between Kenya and Tanzania or Malawi and South Africa. The above transactions can be made simple if the parties accept Bitcoins as a value. The above countries have different currencies that have different purchasing power. Hence, trading in cash can make one party feel undervalued. 

The adoption of Bitcoin as a form of value/price in barter agreements in Africa can greatly help counter many challenges Africans or African companies encounter while selling and buying goods and services using barter. Some of the problems encountered include a lack of common measures. For example, an accounting firm and a marketing company exchanges accounting services for billboard spaces. Secondly, the indivisibility of certain goods and services; thirdly, difficulty in making deferred payments or repayments, meaning it is difficult to know how to pay for goods and services in future. 

With Bitcoin as an agreed form of value, repayments and deferred payments can easily be agreed upon as payment will be made per the agreed items. Bitcoin has a common measure of value, making it easier to carry out transactions. Transactions can be done via mobile apps, making it faster and reducing the travelling times by both parties. Transactions don’t incur bank fees or charges, making them affordable and low charges on international transactions. Lastly, transactions are pseudonymous, making it easier to pay for services, e.g. adult entertainment services and virtual games on online services that require incognito status. 

While there are many advantages to Bitcoin, there are several disadvantages that might occur if Bitcoin is to be adopted. Firstly, cybersecurity risk exposure, as all transactions are virtual, makes transactions prone to cyber thefts and attacks. Secondly, understanding cryptocurrency takes time and effort and exposes or creates a risk to potential investors due to misinformation. 

Thirdly, cryptocurrency is extremely volatile, and with no regulators, there are no rules to protect investors against risk-making businesses exposed. Fourthly, this can lead to the collapse of local Microlenders, Sacco’s, and small banks as investors will avoid storing money and savings in banks and instead save in virtual wallets. Fifthly, the transactions are irreversible and cannot be amended by third parties and financial agencies, thereby making the transactions unsafe. As I think of the world as a Global village, it’s high time for Africa and Africans, in general, to adopt the use of Bitcoins as a form of value in their barter transactions and agreements. This will help the continent evolve faster in payment options, create more stable economies, and ensure that African goods and services reach customers across the geographical spread and payments are received within the shortest timelines. Lastly, help ensure that internet services reach more people and communities.