By Ongera Nyairo…

I first got involved with Bitcoin in late 2013. A client had asked me to help write an eBook on the cryptocurrency. When the book was done, the outcome wasn’t what he expected. Many hours of searching Google apparently didn’t help improve my scanty knowledge of the new financial technology (Fintech).

He reluctantly paid and we parted ways. What he didn’t know — until I told him about it this year — , is that he put me on a road that I hadn’t imagined before our paths crossed. I spent months researching. I reread the Bitcoin whitepaper and scoured project sites like Bitcoin.org and weusecoins.com.

I went as far as reviewing old literature on electronic cash such as Dr David Chaum’s academic paper “Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms,” published in 1981.

I also started following conversations on popular online Bitcoin forums like Bitcointalk and the Bitcoin SubReddit (r/Bitcoin). And read quite a few books.

Three years later, all my work as a freelance writer and copywriter revolve around cryptocurrencies, decentralized applications and other innovations that use blockchain — the technology underlying Bitcoin. I have created content for hundreds of startups from around the world that operate in the crypto space — as we call it now.

Very early on, I connected with a few Kenyan Bitcoin enthusiasts and became an active member of the local community, often organizing and speaking at meetups. For close to two years, ours was a small and obscured community. That has since changed.

2017

Starting 2017, I started receiving a lot of queries about Bitcoin and cryptocurrencies from strangers on Facebook Messenger, email and even through calls. The amount of these messages has only increased throughout the year.

As a Bitcoin enthusiast, it should make me happy that more Kenyans are learning about and trying cryptocurrencies. It however worries me that many Kenyans are putting their money into it without even knowing what it is in the first instant.

Even more worrying, I have observed that most Kenyans are learning about Bitcoin for the first time from scammers who either use it as a medium of exchange or build schemes that incorporate it in one way or another.

It is important to realize that Bitcoin is a method of payment. It is a form of currency just like the Kenya Shilling (Ksh) or the US dollar (US$), albeit a private one.

However, to some level Bitcoin is different from fiat currency when you think of it as an investment vehicle. In particular, the price of bitcoin against fiat currencies has generally been on the raise. That is partly because of the growing adoption going around the world and the fact Bitcoin is deflationary — the supply cap is put at 21 million — , with supply halving after every four years. There is also an element of speculation. The rise of price is however could reach an optimum level at some point and slow down or even retrace.

I am not an investment advisor. My work mostly involves helping startups communicate their business ideas at the technical level to mostly early adopters, technology experts and prospective partners. I have invested a lot of my time trying to understand how different blockchain systems, protocols and applications work under the hood.

Asking me to advise you on how to invest in bitcoin is like asking someone who studies how bank notes are printed and coin minted to tell you how to invest in Kenya Shillings.

However, there are few pieces of advice that are straightforward and I never hesitate to give.

#1 Bitcoin is a currency.

So in the bigger picture, treat it as you would the dollar or the Kenyan shilling. If you want to invest in it, think like a currency trader or a gold investor.

#2 invest only what you can afford to lose.

Bitcoin is very volatile. The price swings are crazy. Today it could be US$20,000 a bitcoin, two weeks later the price tumbles down to US$1000. But that is not to say there is no opportunity to make money. If you know how to trade forex, then doubling in trading bitcoin is a good idea.

On 10th and 18th December, Chicago Board Options Exchange (Cboe) and Chicago Mercantile Exchange (CME), world largest derivative markets, respectively launched the trading of Bitcoin futures. The Bloomberg has reported that NASDAQ plans to launch theirs early 2018.

You could buy and hold Bitcoin hoping the price will go up, trade it on daily basis or bet on its price swings through the futures contracts.

#3 Bitcoin as a project, is open source and decentralized.

Nobody owns the code and the protocol that runs it as they are registered under the MIT licence. This is good and bad at the same time. It is good because then the technology is open to everyone to use as well to innovate on top of it or even to copy it to build something else.

It is bad because cons and scam artists have a freeway. Since, bitcoin has acquired social proof, people are creating bogus investment products and sliding them under the bitcoin brand to scam people.

#4 Bitcoin is the first application of blockchain.

While the rest of the world is as obsessed about speculating bitcoin and other cryptocurrencies as we are, they are slowly shifting to building more blockchain applications, most of which have little to do with finance.

Bitcoin achieved what had never been achieved before. That is the ability of computers in a peer-to-peer network to manage and securely maintain a ledger through consensus. Before it, any kind of ledger required that there is a central authority to maintain and safeguard its authenticity.

For example Safaricom is the only entity — through a select few of its employees — that can access the servers and edit the M-Pesa ledger. Meanwhile, the Bitcoin ledger is public is maintained by thousands of independent computers through consensus.

And since its inception it has never been hacked (yes, exchanges and user wallets are hacked all the time, but not the ledger). Safaricom spends millions of shillings to control access to its ledger, the Bitcoin one is accessible to the public.

Now, developers around the world are replicating the Bitcoin architecture to offer other services through peer-to-peer networks. Some of the services that are coming out include decentralized storage — by startups like Sia, Storj and Filecoin — and decentralized sharing of computing power — SONM and Golem.

One other application that has become popular in 2017, is startups raising funds from the public by creating tokens on the blockchain as selling them as bearer assets. The process is known as initial coin offering (ICO) or token crowdsales. The issued tokens serve as either equity (shares) or utility currencies for unlocking premium features of a service.

Kik is one of the companies that have raised funds through an ICO. In September, the social networking platform raised close to US$100 million from investors around the world.

Several startups as well as public institutions around the world (including in Kenya) are building land registry applications on the blockchain. The technology will cut off middlemen between sellers and buyers in real estate and make it possible to transact land within minutes of coming to an agreement.

You need to try to buy land in Kenya to realize how complex, difficult and costly the process is. But if all land titles are uploaded onto a blockchain along with details of the pieces they document, then it is possible to negotiate with one who is selling the land, meet at the site, and transact. The buyer sends money and gets the title instantaneously.

The buyer is also able to ascertain the seller is really the owner of the land without having to leave the site to do a search. The technology through applications like multi signatures has a room to effect the government directive that a husband cannot sell land without the knowledge of the wife. The ownership can be configured so that two or more keys must approve a transfer through their mobile devices.

It is in the building of similar applications that Kenyans especially the youth should be investing their time, money and skill. Not everyone can trade currencies or cryptocurrencies or stock. There are many options within the crypto space to make money.

Let’s start building blockchains applications and solutions as investment. Platforms like Ethereum and Cosmos make it possible to build different kinds of products through decentralized applications (DAPPs).

Meanwhile, don’t invest in what you don’t know how it works, and if the deal is too good, it is. Also important, before you brand anything a scam, take time to study it. Google and YouTube are at your service. Put them to work.

DISCLOSURE: I own some Bitcoin and some Ether.