In global history, people have always found alternatives. The only thing we couldn't find an alternative to is money... until now.
A renowned blockchain advocate and Africa’s lead authority on blockchain, Lucky Uwakwe is the founder of SABi exchange and advisor of standard protocols. He is also the author of Defi 4 all and a core team of decentralized finance platforms.
Lucky explains, to Damaris Agweyu, a technology that many are yet to fully understand but is clearly here to stay.
You can reach Lucky on his twitter handle: @Luo2027
Could you explain to me as you would to a six-year-old what a blockchain is?
Say mummy and daddy kept some chocolate in the fridge. Twelve packs, to be precise. Now everyone in the household- mummy, daddy, yourself and your younger brother is aware that this chocolate is in the fridge.
What if, in the middle of the night, someone took four packs of chocolate out of the fridge? The following morning you would go to the fridge and find only eight packs left. You wouldn't know who took the four packs, right?
Right.
What if there was something that made it possible for all of you in the household to know who took those four packs of chocolate? A system that would notify you all that at 4 am that night, it was, in fact, daddy who snuck to the fridge and took the chocolate.
That wouldn’t be good for daddy’s rep.
No, it wouldn’t. But this is what a blockchain does. It is a technology that can keep records, and no one can change these records without everybody else's knowledge or consent.
With the blockchain, you don't need to go to a physical 'fridge' to check how many chocolates there are. You'll be able to log in on your phone or computer at any time and do a search- the way you would do a regular google search. But instead of searching on google, you use the blockchain search engine.
To search, you are given a set of numbers or letters; we call them alphanumeric keys. So once you enter this key, you gain access to the contents of the 'fridge'. You can access this information from anywhere in the world, whether it's your bedroom, school playground or your friend's house in the village.
On the blockchain, there are many existing 'fridges' that are used to store 'different types of chocolate'. A lot of the time, it's money, but sometimes it can be budgets of a country, expenses in an organisation, university certificates, property deeds, car insurance certificates, government-issued IDS, school records, medical records…anything that needs to be stored for future reference can be stored on the blockchain.
The original creator of the content will have the private key, while everyone else will have the public key. If the blockchain is private, the creator can edit the contents without the consent of others. But if it's a public blockchain, he cannot edit it without the consent of others. Either way the rest of the participants will always be aware that the content has been edited.
So imagine if we used a specific 'fridge' to store university certificates. Suppose in 1980, 100 students at the University of Nairobi graduated with a degree in economics. Say Lucky is one of the people who claim to have been one these students, and now, he wants to get into Harvard. The administration office at Harvard would simply gain access to this 'fridge' via the public key. If Lucky did indeed attend the University of Nairobi and graduated with an economics degree in 1980, the records will show.
Wouldn't digital versions of the certificate do the same job?
Of course. The problem is, the person who holds the private key, in this case, the University of Nairobi, can choose to alter Lucky's certificate. Suppose Lucky is now a powerful individual who graduated with a D, but wants people to know that he made an A. In that case, he could bribe people at the university and have them change his certificate and no one would know this. In blockchain however, the people with the public key won't just be notified that Lucky tried to change the records; the system will also render his activities irrelevant. He can still choose to alter the documents, but everyone else on the blockchain will have the original record. Then it becomes a case of having two public records of the same thing.
How will we know which is the correct record?
By looking at the majority consensus. A blockchain's strength depends on the number of people willing to keep records and keep them running. That's why we say blockchain gives leverage to the people. Anything you want to be transparent or kept in original form, you want it on blockchain.
So even I can be among the people who can keep records running on the blockchain?
Correct.
How?
By becoming a miner. You just need to download the latest version of the software on your laptop, and you become a miner. From this point onward, everything that happens on the blockchain is stored on your computer; but you computer must be kept running full-time. There are millions of people scattered all over the world who are miners.
But why would I spend my time, electricity, and computer storage keeping tabs on one man who wants to alter his grade from a D to an A?
First of all, it's a way of getting your proof; You don't need data from powerful entities that you don't necessarily trust. We're doing this for posterity and to keep things straight. But also, the system rewards you as a miner, and it does this by paying you with a virtual currency called bitcoin.
Where does this bitcoin come from?
Bitcoin is generated by mining. You can add gold into the current reserves by going into the mines and mining it, right?
Right.
Now the person who first mines the gold becomes the owner—the principle with the blockchain is the same. The person whose machine can process this information the quickest, 'mines the gold' first, so to speak, and is paid in bitcoin.
Blockchain is the infrastructure that keeps the records, while bitcoin is the unit of money transacted on the blockchain.
How is the money transacted?
This is the novelty that is blockchain. If I sent you a picture digitally, you could save the same picture on your phone, and we will have two identical copies. Now, what if I send this same picture to 5 other people? That's five copies in circulation. But for the first time, we now have the technology that ensures that I will no longer have access to it once it's sent. Can you imagine a scenario where money can be duplicated five times? That is not how money works; it would be worthless. How can we ensure that digital money works in the same way as physical money in terms of value? Blockchain technology made this possible. People trust that once money is transferred, it can't be duplicated.
It sounds a lot like how Mpesa works.
Yes, but the thing is, Mpesa only works where there is Mpesa. Bitcoin works wherever there is the internet. And even if it's not there, it doesn't mean it's not been sent.
Because of its power, this technology is prone to attacks, hacks, and government crackdowns. So we need to make it secure, and the only way to do it is to incentivise people to come together and secure it. How can we incentivise the whole world to participate? We tell people, "In future, if you want to keep any record on blockchain, the only way you can make a payment is through one currency, and that currency is bitcoin".
Institutions are now keeping records on the blockchain, and miners provide resources in terms of enough data storage space on their computers. This makes sense for the institutions. Let's take the example of university certificates; nowadays, anyone can fake a certificate. How does Harvard, for instance, protect its value when anybody can duplicate a Harvard certificate? It needs to safeguard itself because the reputational damage can cost it more. So it (Harvard) pays a one-time charge to store its records on the blockchain, and pays up with bitcoin.
People are now seeing the value of the blockchain because we no longer need to depend on google cloud servers to keep our data. Google keeps online records in a central place in the US. What if the American government says we don't like Nigeria; their president is not complying with our demands. We will punish them by withholding aid and stopping American companies from doing business with them.
But what happens to the people who depended on google to keep their records? Maybe our government is building nuclear weapons, but why should I, an innocent citizen, be made to pay the price? Google may not be happy doing what the American government says, but as it is bound by US laws, it will have to comply- or face dire consequences.
So the blockchain is above the laws of any one government?
Yes. This old way of centralising data has been a challenge as people continue to fight for their freedoms and against censorship. Can I leak a secret document about how a President orchestrated election irregularities without fear of being caught? If I post this on Twitter, the government will just ask Twitter to hand over the person's location and network provider. This is how governments have intimidated citizens for years. But what if we had not built our application on a central point but the blockchain? Who do you go to? Where do you find them?
Technically it's like a global revolution; most people do not see it as such, but that's what it is. It started with the angle of money but is now moving to other things. We are now asking questions like, how can we build social media or an email provider on this infrastructure? To do this, you need someone to provide you with a server. What if we offered this server collectively?
Is this the future?
We're already in it.
Will bitcoin render today's currencies irrelevant?
In my early days, I thought it would wipe out today's currencies, but looking at it now, in the long run, I think it will compliment them rather than wipe them out.
The original creator of the bitcoin blockchain said there would only be 21 million bitcoin in circulation. This bitcoin would be mined over a 150-year timeline. The technology started in 2009; we're now in 2021. In the first four years, anytime a miner recorded any transaction, they would get 50 bitcoin. After four years, the reward would drop by half to 25 bitcoin because the creators believed they would have incentivised enough people to capture records. It would go down by another half to 12.5 bitcoin the next four years, and then down to 6.25 bitcoin four years after that. The reward would be slashed by half every four years over 150 years. So as the reward continues to be cut, fewer bitcoin is issued.
Who is the original creator of this technology?
To this day, no one knows. We just have a name. Satoshi Nakamoto. There are so many conspiracy theories about who the real Satoshi Nakamoto is, but all are worthless. His name sounds Japanese. His English was flawless. His domain name was registered in some Islands that no one knew. The credit card he used to make payments has no identity. The IP address couldn't be traced. He was meticulous in using lots of encryptions.
He communicated with people in the early days; then disappeared because he felt that governments would be after him. Once he was done with the basic framework, he called on the open community to continue to improve on it- everybody was on board. To this day, we have hundreds of thousands of developers working on it. So if a government was to start a crackdown, where would it even begin?
As more people want to keep things on the blockchain, the demand for bitcoin goes up. And with more people asking for it, the price goes up. It went from 0.1 cents in 2009 to around 32,000 dollars today- this time last month, we saw an all-time high of 60,000 dollars for one bitcoin!
Let's say I have one bitcoin, and I'm looking to exchange it for cash. Where do I start?
People started building businesses around exchanges where buyers and sellers transact. It's a marketplace where you can trade your bitcoin for regular cash if you want.
Why are governments threatened by the bitcoin blockchain technology?
Because they can't control it, it takes away their power over the people. And quite frankly, most governments don't understand it. So they crack down on miners and shut down the bank accounts of the exchanges. Look at what's happening in China today. The thing that governments fail to realise is that they will never shut us down entirely. Even if the Chinese government said they would shut down all miners in China, and America does the same, what about the person mining in a Nigerian village?
A government crackdown could undoubtedly drive down the value of bitcoin, as we have seen happen in China. The Chinese government saw that the people are becoming too powerful. They are no longer keeping money in banks but are using electricity to power their computers for mining activities. They are paying for their electricity bills, but still, the government has the power to cut off electrical supply to anyone who is mining. People got scared and started selling their bitcoin. And if everyone is selling, the price plummets. That is why the value of one bitcoin recently dropped from 60,000 dollars to 32,000 dollars.
The value could also plummet because of an influencer. Case in point, Elon Musk whose single tweet dropped the value of bitcoin. But I think he pulled the stunt because he is a huge advocate of clean energy. Meanwhile, miners are powering their computers with electricity that comes from energy sources like nuclear power plants. Musk's concern was global warming. And this is why: As a miner, I will earn more money if my computer will be the first to calculate data. In that case, I will look for a sophisticated computer called ASIC with specific integrated circuits for calculating mathematical inputs. This computer is about 100 thousand times faster than your standard computer. This generates higher amounts of heat, so you need cooling systems. But you see this means more electricity is consumed.
Elon Musk then says, "I have more than 1 billion dollars’ worth of bitcoin, but I'm not supporting it". I mean come on! When such a pronouncement comes from someone like this, people will sell.
Is mining bad for the environment?
It consumes energy, yes. But we ask ourselves: given where we are, where we are from and where we are going, who consumes more energy? Do you know how much electricity a bank consumes? Are banks not adding to global warming? This announcement by Elon Musk was just a sentiment to drive the price down.
They are concerned that computers around the world were added to one network to generate power that is the equivalent to the kind of power needed to power a nuclear reactor. And global powers are saying: we can use this energy for better things. But excuse me, we are not using our computers to build nuclear plants but to keep transparent records!
They say the amount of energy required to secure a blockchain worldwide is equivalent to the energy a country like Finland spends in an entire year.
Is this true?
Yes, but their concern is that we should not consume this much electricity on some dumb inventions. It's pathetic because the amount of energy consumed by banks around the world is even five times more. Every time you enter a bank, the lights are always on; I am yet to see a bank say, we are closed for the day, switch off all the lights and turn off all the fans. Has anyone ever complained about this?
Look at the energy that companies that are mining gold and silver consume.
How about when you summarise the amount of energy being used to mint money? It's a lot more than what is used to mine digital currencies; but they are not complaining about that.
This is nothing but social media pressure to push the narrative of something they don't like; it has nothing to do with global warming. True, our activities consume more energy than a country like Finland, but this is still not addressing the issue.
Bitcoin came after the financial crash. People's money became worthless. They hadn't committed any crime. It's the banks that caused the 2008 global meltdown. It's the governments that forced the taxpayer to bail out of these banks' foolishness.
Some have voiced concerns that terrorists can take advantage of the anonymity behind digital currencies?
To be fair, that's the challenge, but before 2009 what were the terrorists using? Bitcoin? Don't blame bitcoin for your ineffectiveness. As a matter of fact, terrorists use dollars or Fiat far more than they do bitcoin.
But to answer your question, the market exchanges now have analytic tools to help track people who use bitcoin for fraudulent or harmful things. But you need to prove to the exchange beyond doubt that these people have done something illegal. We cannot be used to enable witch-hunts.
How did you get into this space?
I was always geeky as a child, reading anything about everything. I did Arabic as a course once. People were like, "You're learning Arabic now? Are you a Muslim?" And I was like, "It's not about the religion"... They just didn't get it.
I loved communities that had what we called weird discussions, discussions which, at that time, didn't make sense. I was reading about driverless cars when I stumbled on bitcoin on the dark web.
The dark web is another angle of the web different from the web as we know it, twice the size. It's called the dark web because, in this place, anything goes. We don't use google browsers. Say I am an investigative journalist who wants to tell a story without fearing for my life. Regular broadcasting houses may not want to touch my content because they are also scared of the authorities. If I put it on Twitter or Facebook, I will be tracked down. So what do I do? I go to the dark web as an anonymous person and sell the content. The challenge then becomes; how do I get paid? If my story was published on CNN, they wouldn't go for CNN but the originator of the story. I will not have provided my real name, but I got paid 10 dollars for the story. Ok, CNN, which account did you pay to? CNN may have an informant who can provide this information. Then, my goose will be cooked. That's why you had WikiLeaks doing the dirty jobs, but even with that, you see how they've messed Julian Assange up.
As a young lad in Nigeria, I couldn't phantom paying 3000 Naira to watch a movie at the cinema when I could have just gone to the dark web, and paid 100 Naira worth of bitcoin to watch the same film.
This is how I got into bitcoin; through purchasing things, which, in the ordinary world, are seen as illegal. Yes, buying pirated movies and books is not right. But innovative industries tend to have shady beginnings.
Video streaming wouldn't have been possible without the porn industry. While it's not something to be proud of, the porn stars popularised it.
Same thing with bitcoin. At the end of the day, say the porn star charges 10 dollars, the bank takes 4 dollars. Why? Because you've used a credit card to pay. For what? Maintenance fee. But what are they maintaining? It's never good in terms of why people do these things, but in the end, they take 30% from them. In comparison, bitcoin offers them 100%.
People were using bitcoin on the dark web, but did it mean we couldn't use it in the real world? I googled and saw a whole world out there! Schools in the US were offering courses on Blockchain. For a school to have a structured academic program on this, I knew it was no longer a joke. I now have an Msc in Blockchain.
My first degree was in oil and gas sector. At 19, I'd already set up a company and employed staff. I was doing schematic designs for the oil and gas industry. But in 2015, I said goodbye to oil and gas to focus on this technology.
So now I have a marketplace called SABi exchange; I'm into payments and helping people convert remittances. We are democratising this along the way. I am consulting for businesses to help them understand and fit into this technology. I have consulted for the Nigerian government to help them understand blockchain.
How did that go?
The central bank was skeptical and thought it to be dangerous- they asked me to take a week to train the staff. They were like, we don't want to spend time googling and searching, tell us like it is. And I was like, its ok, I'm a blunt guy anyway, we won't have a problem there.
I showed them no mercy in terms of how powerless they are in the bigger scheme of things. They asked me if they could shut it down, and I was like, you don't know what you're dealing with. In practical terms, the global resources that have been put into securing the bitcoin network right now stand at 16 billion dollars. It can be hacked, yes, but you need a lot of resources to do that. And the beauty is that blockchain has been built such that after every 10 minutes, it self corrects if it sees that something is trying to attack it. The rest of us will adjust and leave you behind with your fake records. Fighting it is futile. So the best thing is to negotiate, figure out how to regulate activities.
What does this technology mean for Africa as a whole?
It gives us the freedom of choice on a global scale which translates to more buying power for the people of Africa. Africans are among the most highly migrated people globally, and many are remitting money back to their people at home. Now the cost of sending money from the US to Africa is high, very high in comparison to other geographical locations. If I send 100 dollars from the US, I am charged 20 dollars. In the end, my people get 80 dollars. On the other hand, if I am sending money from the US to Asia, I am charged 9 dollars; to South America, I am charged 12 dollars; North America 5 dollars. And it's not a question of distance. It's just how it's been structured. Africans are charged more on remittance. Why? Because of big brother oversight? The system has been rigged against a certain race, religion or continent; who knows?
Nigeria used to have foreign inflow from banks of around 2 billion US dollars per year, but this figure has been dropping drastically over the years. In 2019 it was 500 million dollars. In 2020 it was 94 million. What happened? People have switched to bitcoin. We are telling these guys, hold your dollar; we don't need it.
This freedom of choice trickles down to the local level within our countries. Who would have imagined that I would leave the oil and gas sector for the blockchain/crypto and still be able to live a good quality of life? Everybody in Nigeria was looking to the oil and gas sector for financial success. Working for Shell, Chevron, or Total was our meal ticket. But today, when the crypto boys walk into the club, they will shut it down.
I am not doing anything illegal, and I can afford a good life. I am employing people, contributing to the economy. This industry has given me some level of empowerment, something that no government can take away from me.
Young people have had enough of being controlled by governments that do not care for them. Governments are yet to understand this. Bitcoin is not just about money or get rich quick scheme- it's a protest; our disenfranchisement with how the system has mistreated us and misused what we have entrusted them with.
In the so called developing countries, we have governments with the power and means to give us constant and reliable electricity, but corruption just won't allow them.
They couldn't give us good roads. You buy a car, and it's always at the garage; the good roads are reserved for the posh areas.
They couldn't give us clean, steady water; we have to rely on additional boreholes or buy tanks.
They couldn't provide us with high quality health care, we are forced to fly our people to get treatment from more developed nations.
They couldn't give us good quality, affordable education; we have to pay a lot of money to take our children to private schools.
They couldn't provide us with security; we have to hire private companies to guard us along with extra barbed wire and dogs.
In the case of Nigeria, they couldn't even give us cheap fuel, and yet we are an oil-producing country.
They couldn't do those things that they are paid to do.
The worst part is even the currency they control called the national currency; they couldn't even keep it stable. Inflation is up by the day.
We find that in global history, people have always found alternatives. The only thing we couldn't find an alternative to is money... until now.
You can reach Lucky on his twitter handle: @Luo2027
