eBusiness Weekly
By Jeffrey Gogo
More than $6 million worth of Bitcoin was traded on digital currency exchange Golix last year, as Zimbabweans spent $1,8 million paying for goods and services abroad using cryptocurrencies.
That’s the equivalent of 60 Bitcoin sent out.
Much of the payments covered school fees, cars and rent for university accommodation, according to Nhlalwehle Ngwenya, spokesperson for the Harare-based trading platform, which facilitated the transactions.
Golix, a start-up that only two years ago exchanged a few dollars worth of Bitcoin each day, has partnerships with Japenese car exporter BeForward and money transfer platform Study263, which both support Bitcoin.
Zimbabweans import tens of thousands of used vehicles from Japan each year.
And thousands of students are scattered at universities in Africa, Asia, America and Europe.
But a shortage of foreign currency at home has made international payments difficult.
There is a great deal at stake, not least the tight Reserve Bank of Zimbabwe controls on foreign payments.
The Bank’s hierachy of essentials for forex allocation often relegates such items as luxury cars to the bottom.
Last in the queue, some individuals feel disappointed. They have had to look elsewhere for options.
And they found that in Bitcoin, a form of internet money only usable on computers and smartphones, one that claims independence from government or bank control.
Rising costs
When it started, the creators of Bitcoin billed the virtual currency as one better than notes and coins in every way possible.
Bitcoin was flaunted as a faster, cheaper and secure way of making payments online across nations – much better than a bank wire, they said.
Today, as a means of payment, Bitcoin is beginning to look like a fraud, critics say.
Fees are rising and transaction times taking much longer as a result of price fluctuations and the influx of new investors attracted by Bitcoin’s wild price surge late 2017.
For example, someone told the Business Weekly how it costs them $30 to move $7 Bitcoin’s worth on Coinbase, an American exchange.
Eventually, the person dropped the transaction altogether.
It is little surprise that global firms like US-based Stripe, which facilitates online financial payments for over 100 000 people, and Microsoft, have discarded support for Bitcoin payments. Facebook is banning cryptocurrency advertisements.
It now takes more time to complete a sale due to the Bitcoin price volatility.
By the time a transaction is confirmed, the price would have changed a couple of times, risking issues of under or over pricing of products.
At Golix, which has seen users spike to 41 000 from 226 two years ago, that growth has “brought along several hurdles…which we are tackling on daily basis,” said Nhlalwehle Ngwenya, the exchange’s spokesperson.
But “Bitcoin is no longer the most viable payment method”, he asserted.
Ngwenya blamed rising transaction fees on the increased traffic on the Bitcoin network.
“This (higher fees) is triggered by congestions in the Bitcoin blockchain,” Ngwenya told the Business Weekly, by email.
“Due to high transactions, the blockchain becomes congested and processing transactions slows down,” he said of the system, which “mines” about 3 500 Bitcoin everyday, with a maximum 21 million only, ever to enter circulation.
Ngwenya said crypto investors had an “option to pay a higher fee for immediate delivery or wait until the blockchain is decongested to make room for lower fee transactions to be processed.”
Better as an asset
With the transaction problems all the more evident, Bitcoin looks like will flourish more as an asset than as currency.
It is best suited for trading as opposed to one for which to make payments with.
Many people are already looking at, and treating Bitcoin this way, a store of value, buying and holding as they do with gold.
Bitcoin enthusiasts already regard the currency a “digital gold”.
Also, there is a range of altcoins – basically any digital currency which is not Bitcoin – that offer lower transfer fees and faster transacting times including, Bitcoin Cash, Litecoin, Ethereum, Dash, Bitcoin Gold and others, competing for attention.
But in Zimbabwe, the lack of foreign currency as well the desire “for financial autonomy to make international payments and remittances” will likely continue to draw many towards Bitcoin..
