Bitcoin in Wakanda
Tuesday June 21, 2016
I often hear underbanked Africans as a citation for increasing the block size limit in Bitcoin. It is claimed they won’t be able to purchase their goods at the local bazaar in a retail fashion, which usually isn’t how many tribes in the so-called third world tend to barter. After much thought, it seems the system as designed and functioning can still highly empower the underbanked tribes in the remote areas of Africa. In fact it is possible the transfer of wealth Bitcoin could potentiate, would facilitate a never before seen era of prosperity in a land that was raped by 19th century imperialism.
I will attempt to break up the fallacies utilized as pseudo-arguments to increase the block size in relation to the third world, as most of these arguments completely ignore, or even deny the existence of imperialism in Africa during the 19th and 20th centuries.
Those of us who were really excited when we learnt about BTC’s (supposed) censorship resistance, were so for its allowing places like Zimbabwe and Venezuela to start partaking in their local and even global economies, and create a currency for all to be able to make banks truly optional (and consequently force them into honesty for those who’d still like to use them).
Right now this use case went right out the window.
There is a lot wrong with this statement, since it completely ignores what caused the current problems in those countries. Colonization traditionally leads to destabilization and sometimes eradication of the indigenous population. Zimbabwe is a prime example of when imperialism goes wrong, as it usually always does.
Cecil Rhodes proprietor of the British South African Company, arrived in Zimbabwe in the 1880’s in order to secure mining rights from the natives, the Ndebele Kingdom. Now Cecil Rhodes is an interesting character, he envisioned annexing a territory for the British Empire that connected the Cape of Good Hope all the way to Cairo, along with constructing a railroad line between the two points.
The raping of the natives fine land started with the Rudd Concession, an agreement between the colonist and King Lobengula of the Ndebele Kingdom giving the colonist exclusive rights to mine the gold from a nearby deposit. Sounds a bit sketchy, especially when you realize that the concession only cost the miners £1,200 a year, 1,000 rifles and 100,000 ball cartridges (clips of ammo). For those wondering, £1,200 in 1890 is worth about $250,000 today. The colonist blatantly scammed the natives of their natural resources.
Now the story gets significantly worse, including a war between the Ndebele and colonists, King Lobengula dying of smallpox (I wonder where he got that from), and inevitably a colonial rule that destabilized the entire region. Rhodes will inevitably be known as the person who completely eradicated centuries of culture established by the natives in only a few decades. Even Kublai Khan’s empire looks a tad more ethical in comparison given the Great Khan allowed for native culture to be preserved and shared under his rule.
Zimbabwe was raped of its gold. Unfortunately the natives did not yet have the technology available to mine and smelt gold ore, or the military resources to defend colonists from stealing it. Instead they were seen as lesser people and robbed of their potential wealth in natural resources.
This is why the above quote is so insulting. It assumes an increase in the block size limit to give starving Africans a “cheap payment network” will solve over a century of problems caused by European imperialism.
Well the question arises, “How will Bitcoin in its current form help the impoverished citizens of Zimbabwe?” Well the answer is complex, which is where the fictitious African nation of Wakanda can be used as an example.
For the non-comic book nerds, Wakanda is a fictitious African nation appearing in Marvel Comics, which serves as the home of T’Challa, the Black Panther. Wakandan royalty began about 10,000 years ago, where the tribes of the region were united by King Bashenga who became the first ever Black Panther. Around this time it’s implied a meteorite slammed into region carrying a huge payload of vibranium, the imaginary metal used to construct Captain America’s shield.
Well T’Challa’s father T’Chaka discovered the buried vibranium meteorite, and sells minute portions of it on the global market for vast profits. Meanwhile, he isolates the country from the rest of the world, and utilizes a portion of these funds to send the brightest minds of the nation to study abroad, which inevitably transforms Wakanda into one of the most technologically advanced nations in the world.
The main difference between Wakanda and Zimbabwe? Wakanda was not subjected to brutal imperialism which resulted in the theft of its natural resources.
There are people like T’Chaka in Zimbabwe who are wise and resourceful. This is undoubtedly so, as even in the 1890’s King Lobengula knew of the colonists intentions, and actively avoided colonist for as long as possible. His patrolman who kept tabs on pioneers landing in the area, served as a way to isolate his small nation from the rest of the world.
The wise and resourceful will inevitably rise again, and will need proper tools to accumulate their wealth. Zimbabwe has never had those tools. The country gained its full independence in 1980, introducing the Zimbabwe dollar, which at the time traded for more than the US dollar. The 1980’s were extremely prosperous for Zimbabwe.
The 1990’s saw the introduction of an Economic Structural Adjustment Programme, which resulted in the complete destabilization of the country. The program was meant to help Zimbabwe develop more privatize industry particular in manufacturing to compete in the global markets. On paper the program sounded like a good idea, but it was paid for with nearly $3 billion in borrowed money from the IMF and other central banks. The high interest rates combined with economic downturn led to rampant poverty spreading across the entire country. Unsurprisingly this plan was mostly written by the IMF and various central banks.
Storing wealth for the future that cannot be seized – this is what Bitcoin promises. Zimbabwean’s had no way to store wealth for later investment purposes. They have always been on terms of a tyranny, be it the Rhodesian colonists of the late 19th century, or the IMF destabilizing the country with buggy “economic development programs.”
The wise and resourceful farm owner begins learning about Bitcoin and stashing his wealth in Bitcoin to avoid rampant inflation. Over a decade he stashes a few hundred bitcoins.
Eventually his farm collapses due to drought, but the purchasing power of his Bitcoin stash has maintained its value during hyperinflation of the surrounding fiat economy. He has the ability be a bank and finance individuals he trusts to revitalize the local economies the IMF essentially destroyed through a flawed economic development strategy.
He decides to invest in sustainable energy in smaller villages, such as solar panels. These villages utilize these new resources to filter clean water, lowering the rate of cholera. These small villages, connected to the internet, end up exporting digital goods in exchange for Bitcoin. Each village, like the genesis farmer, is able to establish a bank backed by value that is resistant to confiscation, and hyperinflation. They begin investing in their neighbors, which allows the various local economies to have real growth.
The export/import strategy of using Bitcoin as a sort of reserve currency will allow these small Zimbabwean villages to store the fruits of their labor. They are finally entitled to the sweat from their own brows.
This hypothetical scenario does not require a blocksize increase. Each member of a small village generally have known each other since birth, which reduces the need to transact Bitcoin between local peers, only global peers. In these areas, there is meaning behind the phrase, “It takes a village to raise a child.” This meatspace web of trust is facilitated in a different way than a GPG web of trust, but it accomplishes a similar task.
The individual banks in each village may decide to issue a local currency backed by Bitcoin reserves, to prevent massive block chain bloat. They’ll trade these paper notes for Bitcoin, and vice-versa, creating liquidity in the local currency backed by private banks Bitcoin stashes. Each individual only utilizes the bank for loans and liquidity in the local currency.
A financial advisor with legitimate advice will tell a client in regards to savings: “Do no put your savings in an easily accessible place. Make it so there is work to be done so it takes effort to spend it. Otherwise you’ll end up spending it.” If Bitcoin is utilized as a decentralized store of wealth, it doesn’t need to be accessed very often. Each Zimbabwean family would have a household stash of Bitcoin – their life savings. Some will state “at the current population of 7 billion in the world, Bitcoin can not be used by all of them.” This statement disregards that 1/7th of the world population is under 10 years old and 2/7th is under 18. This leaves about 3-4 billion people below retirement age (the workforce). This makes it so if each of these people used Bitcoin, each person would be able to make 1 transaction every 3 years.
Well lets think about this for a second. By the time Bitcoin is used by 3 billion people it would necessarily have the market cap of the GDP of a small first world country. Switzerland for instance had a GDP of $685 billion in 2013. If Bitcoin were to reach this market cap, each bitcoin unit would be worth between $32,000 and $42,000 depending on the total coins issued at the time. Each Bitcoin is essentially a gold bar.
If this is the case, most families in these villages would hold a BTC stash to store their life savings. They wouldn’t need to transact, only receive payment, which makes the compelling argument for exactly how quickly do they need to receive this money. I would argue, the only transactions single families would need to make themselves is for investment purposes or procurement purposes – liquidating a portion of their savings to invest in their community or purchase a large amount of goods. This would likely mean, they would only require 1 or 2 transaction per year. Savings should be used as a legacy vehicle, whereas another form of high velocity currency (backed by BTC of course), could be used for daily purposes.
Unfortunately there are some who believe every transaction needs to go on the blockchain. That in the hypothetical situation of the Zimbabwean’s using Bitcoin to stimulate the local economy, each member of the local economy needs to transact on the blockchain for no real reason. The big blocker argument implies these local economies need to be connected to some sort of decentralized e-commerce system, (which has its own problems). It’s insulting to think Amazon.com would at all help an ordinary Zimbabwean. Bitcoin empowers just the way it is, and unfortunately some people believe Bitcoin must be radically changed to achieve success.