Much has been talked about the early adopter advantage while in fact we are not even in that stage yet. We’re at the beginning of the innovator stage in the technology adoption lifecycle now. The early adopter phase is next. So we still have some say in who those future early adopters are going to be who are going to realize the early adopter advantage. I argue that the early adopters should be some of those who so far have been systematically disadvantaged, specifically people of small, poor nations, many of which can be found on the African continent. This is desirable from an ethical and a fairness point of view, but those nations can also quite easily bring something to the Bitcoin community we’re sorely lacking: Scores of users. Those users can help us to bridge the chasm beween enthusiast adopters and pragmatists where we might otherwise get stuck.
Being poor does not exclude them as Bitcoin users. Many African states have quite extensive mobile phone coverage and many of these phones are able to run a liteweight client if one for low cost mobiles gets implemented. It is also possible to back the local currency with Bitcoins, like other currencies used to have a gold backing. Unlike gold, it would be easy to check on the actual backing by linking a serial number with a Bitcoin account in a Web database. Doing so would implicitly make a Bitcoin transaction out of every cash transaction of local currency. It is not even necessary to print new bills, even though bills with a QR code on them would be desirable. Would a top down approach disrupt the economy? Not unless it’s badly executed. If well executed, it can flush large quantities of capital into a country that needs it badly. Since these economies are quite simple structured, consisting mostly of subsistence farming, and therefore lacking all the complex interactions of a developed economy, it should be quite possible to foresee problems and move in time to avoid them.
Why would the central bank give up control over the currency which is their source of power? Well, they would do so if they get something better in return: The chance to take some central bank functions in the upcoming global Bitcoin economy. The network effects seeded by the adoption of a state would make Bitcoin an entirely different animal. Trade with that country would have to be conducted with Bitcoins, requiring many commercial entities to adopt it. Having the inertia of a real economy behind it would make Bitcoin stable and hence useful for more merchants. There network effects would propel the country from a poorhouse to a local economic powerhouse. The country would have traded local control for global control plus a large capital inflow?
Where does the capital inflow come from? Obviously this is a pump. And at the end there can be some dump. Where is the end? I have little doubt that speculants would drive the price well beyond $1000 once the press spreads the news, especially considering that a large amount of Bitcoin has been skimmed off the market at that point by the central bank.
With that idea and a presentation on my laptop I went to a number of embassies last year. I had a ripped version of the video “What is Bitcoin“, a number of charts and the goal to work my way up the central bank or the government to sell them the idea and to enter a dialog on how to best adapt that to their nation’s requirements. Funny enough, I think only the embassador of Zimbabwe seemed to really understand the full issue. I was a bit afraid of Zimbabwe at first because of their reputation of treating white guys and I half expected to get the boot. It turned out that they were very friendly and very welcoming, however. Zimbabwe did not really fit into my list because it’s actually too big. But since they currently don’t even have a currency, I thought it could not hurt to go for gold – in this case to propose direct adoption of Bitcoin as a national currency, no less. Once the ambassador understood Bitcoin, he went straight to the point of money laundering and it looked like this idea had him preoccupied from that moment on. It also seemed that the idea of relinquishing control seemed quite foreign to him. So there was failure #1.
Malawi’s embassy in Berlin is a stately house with a number of SUVs parking in front. This representation alone must eat a sizeable part of the national budget so I thought those guys in there must be important enough to get me right to where I wanted to go. They even have a Counselor for Trade and Investment and she seemed quite interested. I left the embassy with a promise to connect me with the relevant persons in the central bank and a lot of brochures that made me want to go there as a tourist, but would turn me off as an investor in anything but tourism.
Burundi was where I put most hopes in. This country, along with Rwanda, is heading for a Malthusian disaster like it did already 20 years ago. They must do something. Anything! They are a nation of children. Their median age is 16.5 years. Most of those kids will have no place in society once they come of age. There is only one way all these future young men can go if nothing happens: Into war. Their GDP is also just the right size and currently the country is relatively stable. I found the embassy in a rented apartment on the 3rd floor of a run down building from the 19th century, on top of a flower shop. At least they have a sense for proportion. The ambassador was a mid-30 who worked at the central bank of Burundi before. That got my hopes up even more. At least until that job experience led him to reject the idea with arguments that in my opinion missed the point by several light years.
I never got further than this. Bitcoin is a chance for fledgling economies, especially the likes of Rwanda and Burundi to get on their feet. It almost hurts to see them let it slip out of ignorance. I hope someone who has the right connections reads this article and takes the idea further.