Below is a summary of an article written by Alex Gladstein for Bitcoin Magazine.
Article synopsis by Elliot Eizik
2/18/24
One wonders what might come of a monetary revolution on par with the biggest inventions in human history. Morally speaking, it is hard to argue for today’s monetary system, where approximately 1 billion people enjoy a globally accepted, freely tradeable reserve currency, and 7 billion earn wages in strictly inferior monetary technologies.
At times, the dominant currency is rescued by tactics like aggressive interest rate hikes that crush more than 150 other weaker currencies, depleting the wages of billions of people. Politics and markets have both played a role in creating this currency caste system and left alone, it seems it might only get more and more brutal, with peripheral currencies getting weaker and weaker and dominant ones becoming more and more widespread.
Where you are born should not determine the quality of your wages, yet until now, it does. Bitcoin is, without exaggeration, something like a glitch in The Matrix. Something the current system did not expect and cannot process.
Bitcoin is a dual revolution for many of the close to 1.5 billion people living in Africa, allowing communities to utilize stranded energy while giving them access to a parallel global economy based on property rights rather than borrowing from abroad with strict conditions. More than half of Africa’s population doesn’t have reliable, consistent electricity. Without electricity, the norms we are accustomed to in the West, like WiFi and Internet access, simply don’t exist without the infrastructure to build and sustain it.
In the modern financial system, countries like Kenya, Malawi, and the DRC must obtain dollars or euros to buy planes, industrial equipment, fertilizer, oil, or even to pay back debt. Bombardier, for example, is not going to accept kwacha, the local Malawi currency, for payment. Printing kwacha to buy dollars is not an option: it crashes the local currency. So policymakers must focus on making stuff that the US, Europe, or China wants instead of what the country needs. Only then can they earn the dollars to be able to advance as a nation.
It doesn’t have to be this way. If Bitcoin becomes a bigger and bigger piece of the global economy, African nations will be able to transform their energy into a global reserve currency without asking permission from or doing business with any empire or faraway power.
As of late 2022, a European or American company processed 80% of all inter-African payments. But in a Bitcoin world, Africans could trade with each other without paying what is essentially a tribute tax to former colonial powers. There would be no global rent-seeking as someone in the DRC trades with someone in Kenya; it could be a truly peer-to-peer transaction.
We are told to believe progress is always happening and pure human innovation is going to make things better and cheaper. But in Malawi, given the collapse of the local kwacha currency and the lack of infrastructure investment incentives, the electricity grid's expansion has not just been stalled; it has been made prohibitive.
Bitcoin fixes this in two ways: by directly delivering a high-quality, peer-to-peer currency to the power generators and by allowing them to use all of their capacity all of the time, lowering prices for their customers and raising their profits.
Critics often frame Bitcoin as a waste of energy. But in some of the areas of Africa, like Bondo, as in so many other places around the world, it becomes blazingly clear that if you aren’t mining Bitcoin, you are wasting energy. What was once a pitfall is now an opportunity. Bitcoin miners can be thought of as dung beetles, scraping up the waste energy that no one else wants and transforming it into something valuable.
All excess power generated by Bondo’s power stations gets sold in real time to the Bitcoin network by Gridless’s miners. It arrives directly to Mega’s (Mulanje Electricity Generation Agency,) Malawi’s first privately-owned micro-hydro energy provider’s wallet, in BTC. The new capital is enabling Mega to connect more customers to power, drive costs down, and expand their operations to eventually connect everyone in the Bondo region to electricity. Mega, the community, and Gridless all benefit. And the most profound part? No aid or government subsidy is required.
How can people without the internet use Bitcoin as a stable currency?
Africans in countries like Malawi can use a service called Machankura to send or receive Bitcoin from any feature phone or smartphone with no data: no internet is required. This means that an economic escape route is here. USSD is a protocol for communication over text messaging, and no internet is required.
The new service would allow feature phone users -- or smartphone users with no data -- to send, receive, and save Bitcoin. Some of the biggest challenges that Machankura overcomes are in the UX area: traditionally, people need to copy and paste an address or read a QR code to use Bitcoin. But feature phones, in general, do not have these capabilities. USSD has a 182-character limit, which gives Machankura users an email-based, human-readable identity. For example, [your phone number]@8333.mobi.
Of course, big challenges remain. One is scaling across the entire African continent. Right now, services like Africas Talking can access different telecom networks. In that model, Machankura pays a monthly fee to Africas Talking for airtime instead of the users paying the telecom directly. The scaling is a slow but steady process but is happening, even in places like Malawi.
A second challenge is custody. At the moment, Machankura is a custodial service. Meaning: they hold your Bitcoin. Not your keys, not your coins. So, even though it’s a very useful tool, it’s not giving its users property rights. But, in the coming month, Machankura is planning to release a proof-of-concept that allows users to self-custody. If it works smoothly, it will be one of the biggest innovations in Bitcoin’s history, allowing people without the internet actually to be their own bank.
Harnessing the natural energy of the Earth
Geothermal is probably the single best existing power source in the world for Bitcoin mining. Hydro is great, but during dry months, it can slow down. Nuclear might be better in a vacuum, but it’s impractical at the moment for small sites and at least a decade away from a rollout across Africa. Geothermal is 100% clean and 100% consistent. A plant with a strong natural source could run for 40 years without interruptions and no power output change.
The earth’s heat is powering agriculture, and the Bitcoin mine is eliminating any electricity waste and converting it into digital gold instead. You realize that not Bitcoin mining is such a staggering waste of energy. Bitcoin mining is primarily run using ASICS, or Application Specific Integrated Circuits. They are designed to efficiently perform the hashing algorithms used in the mining process, offering significant advantages in terms of speed and energy consumption over general-purpose hardware.
ASICs can be turned on and off at a moment’s notice without harm to the operator, unlike manufacturing or other computing processes, making Bitcoin mining one of the best technologies in the world for stabilizing grids. Without using ASICS, you won’t be competitive, and you’ll be wasting energy.
Bitcoin adoption might mean the centralizing forces of large on-grid mining operations and ETFs in the West. But the amazing irony is that Bitcoin’s technology arc is making the currency more and more decentralized in Africa. As the network eats more and more off-grid cheap electricity at dozens of completely separated sites, it becomes harder and harder to shut down. As the network adds more and more self-custodial users on potentially millions and millions of SIM cards, it becomes more and more unstoppable. As Lyn Alden describes in her book Broken Money, modern monetary technology was inexorably centralizing up to this point as it became more digital and advanced. Bitcoin breaks this trend, and Africa helps Bitcoin break it.
It’s not just what Bitcoin can do for Africa: it’s what Africa can do for Bitcoin. If companies, and, one day soon, nation-states and corporations start converting the continent’s thousands of gigawatts of wasted and untapped hydro and geothermal and biomass energy into capital, feeding all of that electricity to the Bitcoin network, across a decentralized and disconnected grid system, we will have a much more unstoppable global currency.
For hundreds of millions of people, it may not, in the end, be the United Nations Bill and Melinda Gates or the World Bank that brings them into the 21st century, but an open-source software network with no known inventor and controlled by no company or government.
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