What drew your interest into BTC or Blockchain and generally?
Ok. So my story of bitcoin goes far back as 2011, I read an article on Slashdot then that talked about this new decentralized currency. There were lots of things that were said about the technology, how it worked, how it was censorship-resistant and what have you. And back then, I think it was just something I was curious about. I remember I think I did play around with it a bit, but I didn’t take it seriously until 2014 when I actually started paying more attention to it. I think as you would find with most people who hear about Bitcoin the first time, they kind of tend to dismiss it. And I did the same as well. I thought, well, maybe it’s not actually going to work, but 2014, three years later, it’s still around. I think announced that it taking it seriously and my interests really into bitcoin came as a result of my interesting in doing e-commerce. Back when I was in the university, I remember then that, you know, we were just getting access to the Internet for the first time. And I taught myself how to build web applications. And I found an opportunity where I could actually build web applications for certain individuals and I’ll get paid. At that time, there was no way to receive payments in Nigeria my country. So there was this service called e-gold that was in existence then that allowed you to receive payments from other people around the world. And I use e-gold extensively until it got shut down because of some kind of case that they were involved in. So you can imagine that that shutdown actually led to an opportunity that was closed for millions of people around the world. And so trying to understand what led to the shutdown. Why did it happen? Can it happen again? What’s what led me to bitcoin on this whole idea of bitcoin can’t be shut down. What’s really what got me very intrigued about it. And drew me to it in the first place.
Yes. You found it, to be honest, and effectively collecting money online?
Yes, quite frankly, I think it’s it’s the best way to receive payments online, regardless of where you live, what your social status, your background. Bitcoin is something that anyone can set up a wallets in seconds and you can start receiving payments from anyone around the world.
So my question is that so there’s been a little bit of doubt if I’ll see you inside, for example. So get with the politics of support, put in a different area, but try straight up like they did for a while and then get a rebuttal and they get a of what they did play well, they didn’t stop. So in both cases, the reason was because of the delay with the opposition of the. So say that overproduction is too high on its own. So my point is that it looked like it would be between the five year cycle. But now that that volume I attribute, it feels like it, albeit with only weeks only to keep it. So, yeah. What do you say to that?
I would say that, well for merchants, there are a number of merchants who stopped accepting bitcoin as a result of the events of 2017 – where – actually was a disagreement within the bitcoin community on the direction for scaling.
Generally, the idea where you think about how do you increase capacity, how do you increase throughput for some of these networks? Now it’s important to understand why Bitcoin had this problem in the first place. The Bitcoin network has it is decentralized. The whole idea is that there’s no central point of failure. Now, when you’re building a system that doesn’t have central points of failure, there are certain drawbacks. They’re saying tradeoffs that you have to make.
One of those tradeoffs is the fact that if everyone is going to have the ability to participate in that network, then you have to look at the kind of resources that will be required in setting up one of those. And one of the few sources is storage because of how bitcoin is designed. Every transaction to the very first transaction called the Genesis transaction requires the ability for a computer to be able to verify. So if you stand up, if you’ve not used Bitcoin before, you download the software, you install it on, you launch it, it’s going to do two things. It’s going to stop contacting peers on the Bitcoin network and then start asking them for the history of transactions. And it’s not just going to download the history of transactions blindly. It’s going to affect every single one of them. It is going to ensure that all the rules that are in the Bitcoin network are followed. Now, right now, the the the blockchain is around 300 gigabytes. That’s a lot of storage for most people who live in the West, who have unlimited bandwidth plans, they don’t really have to worry about that for people, but for people who live in bandwidth restraint countries. That’s quite a lot of data to download at one time.
So in 2017, there was this tussle between different community members of the Bitcoin community about how to go about scaling. One faction was of the opinion that the best way to scale because, you know, we were kind of heating the transaction throughput and the cap, was that OK, all we should do is just increase the block size. So increasing the block size, we’ll be able to fit in more transactions and we’re going to have all this network being clogged. The other side was like, look, if we do that right now, we’re going to cut off a number of people who will not be able to participate.
Right now, it’s difficult for anyone to run a full node, but it will even be more difficult if we went ahead with such a plan to just increase the block size. So the whole decision was can we think about other ways of scaling? And so, you know, people are talking about the idea of using second layer technologies to scale rather than using the base layer.
So around that period, you know, you had a lot of transactions that were waiting to be confirmed and that was what led to fees actually increasing. So Bitcoin transactions are usually included in the blockchain, based on who is paying the highest.
When you start having lots and lots of transactions waiting to be included, people stop bidding up that space. And so that’s what led to an increase in the number of transactions, while lots of people wanted to use Bitcoin at that time. And secondly, because of that rush, basically to use a very limited amount of space in Bitcoin blocks. It led to an increase in fees. So that led to, like you rightly mentioned. That led to a lot of merchants who kind of saw this as a big user experience fail for people who want to make a payment on their website – they made the payment, but it took five days before the transaction was confirmed. It made it really difficult for them to justify the need – the continued acceptance of Bitcoin on their platforms.
That’s what led to companies like Stripe, PayFast, like you mentioned, even at that time, too, we had companies like bitpay who started trying to push the alternative version of Bitcoin called Bitcoin Cash as being superior because of these increase in the block size. So the interesting thing following that is that I would not necessarily accept the fact that merchant acceptance of bitcoin has dwindled. I think what we’ve seen is that some people have stopped accepting it. In the same vein, we’ve had a number of people who have started accepting bitcoin and we actually have technologies now that actually allow bitcoin to scale beyond the block size. One of such technologies is called the lightning network and that actually allows people to be able to make instant payments for extremely low fees.
Why couldn’t big corporate interests who had shown interests in Bitcoin like Dell or Stripe supply compute resources to make the bitcoin network more stable?
So it has something to do with how the Bitcoin network is designed. It tries to ensure that there is fair game for every participant. So whether or not you have a lot of resources, it doesn’t really change a lot in the sense that. Bitcoin transactions are generally confirmed every 10 minutes. Bitcoin blocks are technically around four virtual megabytes. But practically, we’ve seen that most blocks are around 1.2 to 2 megabytes in size. Now, there’s only so much that you can fit within into 2 megabytes. And so we still have that particular restriction on the number of transactions that can be confirmed every 10 minutes roughly. So regardless of whether there is a lot of computing power or there is very little computing power, we still have this more or less crowd control system in place that will still make the network run at a more predictable pace.
So the the the automatic solution has always been OK, let us scale on layers on top and you can look at how the Internet works today. We have this thing called the OSI model, right. Where we talk about the different layers from the physical network and presentation. And we see that the Internet has been built layer upon layer. Right. So HTTP that we know is built as a layer on top of TCP/IP. Right. And so the whole idea of using layers as a way to scale technologies has always been an attractive one.
And like your network, for example, is one of these technologies that make it possible for you to scale beyond the limitations of the base layer or the Bitcoin protocol. So why do you have that limit of, you know, two megabytes every 10 minutes with lightning, You don’t have that limitation at all. And the reason why that works that way is just about how the architectures.
So you see Bitcoin transactions are usually broadcast in a gossip manner.
So a node receives a transaction from one of its peers and it gossips and tells every other peer does is connected to it about that transaction. And they in turn do the same thing with known pairs until at a certain point in time, usually within a few seconds, every node that is online has heard about that transaction. Now, if you think about the fact that if we’re gonna be able to support global trade where we’re talking about, you know, probably hundreds of thousands to probably even millions of transactions a second, a gossip protocol is not the way to go.
Besides the fact that we’re talking about storage, bandwidth is also going to be a serious limitation. It’s not that you can’t just arbitrarily increase the block size, but the risk to doing that is that you would increase or you introduce centralization. And don’t forget that this is a technology that is built so that it can’t be stopped at one particular central point. And the moment you start going in this direction of increasing the block size every time you hit its capacity, you are getting closer and closer to centralizing the network and that’s a significant risk to the network.
So, yeah, you might have companies like Dell or Stripe who would have loved to maybe contribute mining to the network to help verify transactions quickly but because of how the consensus protocol is built, you would still have those limitations in place – if you’re talking about transactions on the base layer.
Ok, so a few years ago, it was very common for people to hedge their money against Bitcoin (towards the end of 2017). The value of Bitcoin was increasing almost on a daily basis or an hourly basis. So you put your money in bitcoin and there was almost a guarantee that you will get some returns when you sell it a few days or a few weeks. So that has stopped. The value has never gone back to that level. So for those who consider it a means by means of investment, like gold, like forex trading, what is your comment on that? Is it worth it? Is it something we should avoid completely? For example, because of this COVID19 crisis, theoretically, you would assume that the value is going to increase because so many currencies are losing value against the US Dollars but the bitcoin has not gained any significant value in the last two months. So what’s your comment on that?
So what happened in 2017 was a speculative mania. And I think when you look at the price of Bitcoin since inception in 2009, you would find that it has had this frequent booms and busts.
But if you look at it over a longer period of time, you’ll see that Bitcoin has steadily been increasing in value. So for a lot of people who you know, who saw that short term increase in price they got attracted to because they felt that it was going to be something that they could get rich overnight with. And as you know, with a lot of speculative manias, they come to an end. And so at a particular point in time, people felt, look, the price of this thing is highly overvalued. “And I don’t think I don’t see how I can justify any further price increases at this time.”
And so some people started to sell. And as they began to sell, the price started to come down. And then, you know, at this, you know, the same way people are kind of like in this craze of the fear of missing out, they also got into this fear as well of losing everything. And so it created this panic in the market that led a lot of people to join in the fray of selling off their position to preserve their capital. What you see, there are lots of things about Bitcoin that makes it very different. And when you look at the economics of money in general, you see that when you have something that is extremely scarce that the market will over time, you know, when you have something that is going to be printed to infinity as we have with fiat currencies around the world, it may take a while.
Like, for example, we didn’t have the problem of currencies failing in 2017 that led to the rising price. So we should not necessarily expect that over the short term that we’re going to see a significant rise in the price of Bitcoin.
I think that it’s important that we take things into perspective and look at the fact that despite the short term increases and busts in the price of bitcoin, bitcoin has actually maintained a very, very strong purchasing power over the long term. And when I’m saying long term here, you know, we’re looking at between the range of two to five years.
So for a lot of people who are looking to preserve their capital or wealth, Bitcoin is still a significant and very, very great property that you can own
I like how someone actually terms it. He likens Bitcoin to prime real estate. We’ve been told that all real estate is scarce, you can’t increase the quantity of land. And, because of that particular property of real estate, we tend to see the price of reality increases over time. Now, that’s not to say that the price of real estate doesn’t sometimes crash because the same thing also happens in real estate. The markets sometimes get overheated. And when there’s a correction, you see the prices of houses going down. Does it mean that real estate isn’t valuable anymore? No. Because we’re humans, we would sometimes misjudge the value of certain things. And so we would tend to overvalue them sometimes and other times we also tend to undervalue them. So for a smart investor who understands this, they can actually take advantage of those misjudgments in the price and, you know, buy when the prices look depressed and sell when. When the prices are overvalued. So that’s my own response to that question.
There was a time when you were partly or briefly part of a startup in Nigeria for selling Bitcoin online. What was the biggest lessons you learned during that enterprise in terms of the trend in the local market?
So the way we ran the company for about 18 months in total and it was a phenomenal experience. What we learned from the market was that there is significant demand and that’s a matter of fact, I don’t think any single company has been able to meet the demand for Bitcoin.
The reason is because a lot of awareness is still going on. You know, lots of people are still getting to learn about Bitcoin. But besides the what you could call it the speculative aspect of it, where people are looking to make a quick buck, you know, looking to trade it and hopefully make profits in the trades. You also find people who are using Bitcoin as a way to make international payments.
Now, there are a lot of reasons why they would turn to Bitcoin for to provide this particular service. One of them is the fact that for certain kinds of businesses, that is the only way that they can have access to an instrument that can allowed them to make payments in situations where they cannot access foreign exchange. So a lot of importers who are unable to access the forex market will use bitcoin to make that payment. So for these people, they’re not really interested in the short term or long term price prospects of Bitcoin. For them, it’s just an instrument for them to effect payment.
And so the large, very large percentage of people who are actually using Bitcoin as at the time when we were running this brokerage service actually engaged in this activity. So it wasn’t necessarily I am investing in Bitcoin. It was more of “I need to make a payment of $1,000 – can I buy Bitcoin worth of a $1,000 and make this payment?” And so we had a lot of people who were doing those kinds of payments. And I think that for the vast majority of Bitcoin transactions in Nigeria. I would categorize that probably 90 per cent, maybe 95 per cent of those transactions in terms of quantity, not necessarily value, are actually for payments and not necessarily for investment purposes.
What do you see as the future of Bitcoin?
I think Bitcoin has a very, very huge potential and it has a very bright future. And there are lots of ways in which I can see that actually taking place.
A very classic one, which I’ve actually been most interested in, is in facilitating cross-border transactions, cross-border payments.
Here in Africa, it’s extremely difficult to make payments across borders, especially when you want to make those payments online. If you are able to carry cash from across the border, most of the time you’ll find traders who would be able to exchange it for whatever local currency in your target country. And if you’re going far enough, you would have to buy dollars if you want to be able to make those transactions.
Now, it’s still is still possible for you to make payments using your debit card or your credit card issued by your bank. But these transactions are most likely going to involve merchants who are already plugged into the system. A very vast percentage of the trade in Africa is actually informal and for those informal transactions, they don’t have access to the traditional payments rails that most businesses would be able to.
And so I see bitcoin as being that technology that would with subsequent awareness, that would be used to facilitate more cross-border payment. So you have an importer who once seen for import coffee beans from, say, Kenya, they pay their supplier in Bitcoin, and that supplier can, in turn, convert that bitcoin locally to their local currency to maybe pay their own farmers who are actually supplying them those coffee beans.
So I see that as being one of the really, really big opportunities for Bitcoin to really gain adoption and market share in. Also, it’s already happening today and I only see that growing. It will also significantly improve remittances as well. People who want to send money to their family back home from the diaspora would be able to easily buy bitcoin. So using an app like Cash Tap, for example, in the US and send bitcoin to their relatives in Nigeria, or Kenya, or South Africa and in a matter of minutes they can convert that bitcoin into whatever local currency. So for those who are like, okay, looking to send me a very cheap way to do that. Some people will argue that it’s more expensive. But I think it’s it really just boils down to what kinds of rules you’re using.
But I would argue that because the Bitcoin transactions, the fees and Bitcoin transactions, that irrespective of the value, when you’re trying to move small amounts of money or even really large amounts of money, you can you find a Bitcoin Transactions can be very efficient sometimes for that.
So remittances, cross-border transactions, international payments, obviously even for merchant adoption. So by when I say cross-border payment, it also includes the ability for merchants who want to sell directly to customers to be able to accept payments.
I mean, I think look at look at this situation here in Africa. It’s very difficult to set up an online store that accepts payments from, you know, people in the West. Right. Besides the fact that you need some kind of gateway to be able to do that integration – I think you’ll find that most people are going to be concerned about putting the credit card information on some websites in Nigeria.
I think Bitcoin sold this problem because of its push nature by allowing merchants to be able to accept payment. And even those customers know that there’s no way that they could be defrauded as a result of that transaction.
I know that many governments around the world are not very happy about Bitcoin, due to tax evasion and money laundering. So what do you think?
So there are two issues here. There’s of tax evasion and then there is money laundering for tax evasion. I think it’s mostly a narrative. There is no evidence to show that people are at mass using Bitcoin as a means to evade taxes. And the reason really is you just need to look at how this conversion issues are usually made before you’re able to on-board into bitcoin. You usually go through an exchange. Right. So this exchange you would send your Fiat to and then you’ll be able to buy bitcoin from other sellers on the platform. Usually this platforms have all the necessary KYC AML policies in place to ensure that, you know, they’re able to satisfy the requirements of regulators. So in terms of whether people are using bitcoin as a means to evade taxes, I I would be very, very surprised if that’s the primary reason why a lot of people are doing that. Now, obviously, there are some people who are doing that, you know, just like how people use cash, for example, rather than using electronic payments because they don’t want there to be a record of their transactions. And so the government can have visibility into how much they’re making and how much they’re supposed that’s supposed to pay in taxes. You would find that even with the level of adoption of Bitcoin, it’s the same thing, too, that also applies. So if we don’t have a problem necessarily with cash transactions and we are trying to ban cash because we believe that people are evading taxes by using cash, I I don’t see that as being a narrative that we should be focused on even when we’re talking about Bitcoin. The second issue is about money laundering.
Money laundering is obviously a big problem, right. I don’t think you would find anyone within the Bitcoin community who is honest that would tell you that laundering money using bitcoin is a good thing. Right. And I think this is why we also have regulated exchanges that have all the necessary policies in place to ensure that sufficient monitoring of transactions is carried on, carried out. You would also find that the bitcoin blockchain is also very transparent, so it’s easy to actually trace transactions. In fact, I’ll tell you that certain people have actually said that law enforcement actually loves Bitcoin because it’s actually have 100 percent visibility into how the transactional flows are actually occurring. Once someone on boards, you know, using Fiat on to an exchange, the exchange knows what bitcoin address the bitcoin is, where we dropped drawn to, and you can trace whether Bitcoin left from that addressed in the next address to the next address and so on and so forth. So the audit trail is out there. It’s it’s transparent and you can see good police work. You can easily piece together how the phones have actually flowed online. You know, the use of cash. In fact, I would I would say that most criminals who are looking to launder money are not likely to use bitcoin because of this transparency, but most likely going to use things like cash or even banks. You know, there have been lots of reports in the past that banks have been the enablers of really, really huge money laundering schemes. So I think that, you know, the possibility for the use of Bitcoin for money laundering is significantly limited with good policing work.
Ok. Thank you. So what would a cryptocurrency interview a real future?
In the world today, we have just essentially one reserve currency and that is the U.S. dollar. You would agree with me.
The U.S. dollar is the currency that you would be able to exchange with wherever it is that you go in the world. And so when you think about how much money generally involves, everybody tends to congregate or everybody tends to converge on just one. So for the currency competition, basically we are looking at. When if you have multiple currencies or you have multiple cryptocurrencies, at the end of the day, the most a step to crypto currency, the most liquid cryptocurrency is going to be the cryptocurrency that wins overall. So you’ll see this typically people who actually have online stores and they accept different cryptocurrencies. They would accept bitcoin and then they might now have all that cryptocurrencies that they accept now.
The reason why they accept Bitcoin primarily. Even with those who, you know, have some kind of interest in seeing another one succeed is because from a business perspective, there’s no reason why your customer will commit to you with the most widely accepted cryptocurrency. And you’ll tell them no. You can do business with me because you can accept in X currency. So in terms of which currencies would do, I think will survive. I think ultimately if the application is money, there’s only gonna be one. It might it might be bitcoin, it might not be bitcoin tomorrow, but today it is bitcoin. But there are reasons to believe that it’s very unlikely that we’ll have something else other than Bitcoin. And the risk is, you know, when you look at all the cryptocurrencies. There is very little that they have going for them that makes them significantly different from Bitcoin. So the Bitcoin killer is going to have to be one cryptocurrency all it might be some of the technology that is not two times better than Bitcoin or five times better than Bitcoin. But we’re looking at something that’s going to be between 10 and a hundred times better than Bitcoin. It has to be a significant game changer. And the reason is because Bitcoin is software, all these other cryptocurrencies are software. It’s relatively easy for you to change the code. Right. And so when you hear about all these all the different cryptocurrencies that they’re faster than they have bigger blogs and what have you, at the end of the day, you want to accept the one that is most secure. The one that has the most amount of liquidity. The one that has the widest to use. And so today that cryptocurrency is bitcoin. And until we have a real challenger, I don’t see how it’s gonna be on seated anytime soon.
Ok, so what do you see as the real prospect expense of real life application for blockchain technology in general? The future.
So there’s been this narrative around blockchain, not Bitcoin, and the idea has been that or where we recognize Bitcoin, we know it uses this revolutionary technology called blockchain, and we think we can actually remove Bitcoin from blockchain and we can use blockchain to all of.
And yeah, I’m using that, you know, kind of like as a joke because in my own studies and in my, you know, trying to understand how this technology works, I’ve found that besides the application of money, there is very, very little, very, very little application that blockchain has. Outside of that.
And so it’s really just boils down to how blockchain is working. General blockchains like we’ve talked about some of the challenges of blockchain and how, you know, we have things like transactions being expensive. You know, it being slow blockchain. Is that designed to be that way? It’s it’s a trade off that is being made to enable the network to be sufficiently decentralized. So when you’re talking about using blockchains to implement voting, for example, or you want to use blockchain for land registry and all that, I think what you have is a lot of consultants who are looking to sell snake oils to to a lot of companies who are looking to latch onto the next big thing. And so you find out that a lot of this initiatives eventually end up being not don’t pan out to be anything significant. And we were seen lots of those kind of things happen. And I don’t think that the prospects for the use of blockchain in solving a lot of problems, that’s significant. There might be one or two cases where, you know, when you look at the challenge out the problem you’re trying to solve, that blockchain looks like the most suitable fit. And in those kind of applications, you find out that unless really you’re just trying to use the word blockchain to support that application. If you really want to use a blockchain, you can use an existing blockchain. One of such could be, for example, timestamp. So here’s a here’s an interesting problem right now. We do have the ability for you to sign email messages. You can sign on email and someone can verify that that email truly came from you. But the one thing that you’ll be hard they’ll be hard to prove is when that email was sent. Right.
And so one way you could solve our problem, because obviously you can forge timestamps in email messages. Right. You can make the email to have originated at a later date. And he actually did. However, when you use the timestamp in, for example, which you can do with the bitcoin blockchain and there’s no reason why you want to use anything on the bitcoin blockchain, because it’s the most secure blockchain on the planet at the moment. It’s the one blockchain, you know, that cannot easily be be. Mutated. You know, you can easily change the blockchain if you wanted to to do something like that. Is that you could actually timestamp your your your emails and have them recorded on the blockchain. Now, obviously, it’s not gonna be like the contents of the email, but you’ll have some way of recording it proof that that particular email existed at a particular time. And so that is significant application. I mean, when you think about the fact that sometimes emails do get me Ted in court as evidence, that would be one thing that would increase the validity of the use of emails in court when you can actually prove that an email was sent to a particular date. So that’s just one example. I’m sure that there’ll be other things like, well, I want to be able to timestamp that is that since it was generated at a certain date. What have you. Well, besides this little examples, I don’t really see very significant use of blockchains in other spaces. I mean, right now you have a lot of geeks playing with the possibility of things like smart contracts and what have you. But in terms of solving really, really large problems for society, we haven’t seen one that is bigger than the currency application.
What do you see as the real prospect in terms of real-life applications for Blockchain technology?
BTC is by far the most popular cryptocurrency. It is often touted as an alternative for protecting one’s value. However, the rates relative to the USD has been very unstable. How do you react to this?
BTC was initially a trailblazer and a credible means of online and offline payment. However, the support from merchants appears to have waned significantly partly due to the technical challenges that include slow transactions and high fees for faster transactions. What do you see as the best solution to this?
What do you see as the future of BTC?
What other cryptocurrencies do you think have a real future?