Reshaping the narrative on cryptocurrencies

CRYPTOCURRENCIES   TECHNOLOGY

In his book, Innovation and its Enemies, Harvard Professor, Calestous Juma draws from 600 years of technology history to explain why people resist new technologies. He identifies the tension between the need for innovation and the pressure to maintain continuity, social order and stability. 

"People don't fear emerging technologies because they are new," Prof. Calestous argues, "the resistance comes from established industries and social orders that feel threatened by the new technology's superiority and worry about being displaced." 

This tension exists at the onset of all innovations and is evident in the global debates regarding cryptocurrencies, which include, the changing nature of money, the evolving role of central banks, the threat to America's economic hegemony and the shift in the global balance of power. 

As these global debates ensue, the local debates in Uganda have been far off the mark, awash with misinformation and an inability to distinguish cryptocurrencies from Ponzi schemes. Cryptocurrencies and Ponzi schemes are distinctly separate things that have been conflated and misrepresented as synonymous.

This misrepresentation results from Ponzis masquerading as cryptocurrencies, deceitfully using similar phraseology and referring to themselves as crypto businesses, in an attempt to gain legitimacy while feigning affiliation with trending opportunities. 

A distinction between the two is critical in order to realign the debate and reshape the narrative in Uganda, which needs to shift from the current conflation to deeper consideration of the issues being debated globally, starting with an understanding of cryptocurrencies and their relevance. 

Cryptocurrencies are digital assets designed to work as mediums of exchange. There are thousands of them, but organised into three main categories: (a) Transactional cryptocurrencies like bitcoin, designed to be used as money and exchanged for goods and services. (b) Platform cryptocurrencies like ethereum, designed as backbones for applications. (c) Utility cryptocurrencies like ripple, designed for tasks like facilitating efficient money transfers. 

Cryptocurrencies are created using a technology called blockchain, which encodes the role of trust, previously handled by trusted intermediaries. Blockchains are useful in fostering efficiency, transparency and accountability and their applications often take on the "crypto" prefix because blockchains use strong cryptography for security. Terminologies like crypto-economics, crypto-assets, crypto-wallets, and crypto-funds define the industry. I work with a company called CryptoSavannah, that builds blockchains and also uses the prefix. 

Cryptocurrencies enable direct transfer of digital value, without the need for third-party intermediaries. Although still in early stages, they represent a technology with the potential to revolutionise the economic landscape of our world. 

It is for this reason that governments like China and Sweden are creating their own national digital currencies, while companies like JP Morgan, Citibank, Walmart and Amazon are discussing their cryptocurrencies, and organisations like IMF, United Nations and World Economic Forum are discussing crypto standards, regulations and impact. These are some of the more serious issues that the Ugandan debate on cryptocurrencies should elevate to, and then begin to deeply consider how they will impact our nation. 

A Ponzi scheme, on the other hand, is a fraudulent investment scam, designed as a pyramidal structure lacking a tradable product, and promising high returns with minimal risk. They generate returns for older investors by recruiting new ones, which eventually becomes untenable and collapses.

Ponzis thrive at the onset of new opportunities, masquerading as part of the opportunities, yet are simply taking advantage of ignorance and defrauding people looking for investment prospects. 

Synonymising cryptocurrencies with Ponzis is akin to synonymising emails with scams; when we receive a scam email asking to send $300 to a stranded friend, we don't criticise email, but rather we recognise that a scammer is using email for their crime. As emails and scams are different, so are cryptocurrencies and Ponzis, one is a technology application, another is a crime punishable by law. 

Our media has recently run stories about cryptocurrency scams, including Dunamis, OneCoin and D9, with Members of Parliament debating the same, and some alleging my involvement. 

Firstly, these are not cryptocurrencies; they are scams, similar to the previous Ponzis like COWE and Telexfree. Secondly, I have no involvement with any of them; our company CryptoSavannah builds blockchain solutions and provides advisory services, focused on digital transformation. 

As the 21st century enters its third decade and already defining factor is the digitisation of everything, including money, and early adopters of this wave will sail furthest in its tide. This digital revolution, although global in nature, will impact nations differently based on their policies, socioeconomic structures and readiness. 

This readiness, as Prof. Calestous argues, includes managing the threat to established industries and social orders. Uganda's ability to leverage the opportunity of the digital revolution will be defined by our readiness, and like opportunity favours the prepared mind, so can our preparation yield dividends, like double-digit economic growth, and even surpass our aspirations as articulated in our Vision 2040. 

The writer is an Engineer and Chief Executive of the CryptoSavannah