Mass Crypto Adoption
February 1 2024
by Markus Franke
This article is based on a workshop that was held during the CfC St. Moritz conference in January. This event focused on connecting the Web3 technology space with leading institutional investors, and the themes included the market potential for distributed ledger technology (DLT) and Web3. This year one of the main questions related to this topic was: could mass crypto adoption (by end-users adopting Web3 technology for real-world use cases) be the catalyst for the next bull market? In the first session of the conference, Sheila Warren, CEO of the Crypto Council for Innovation, and Christopher Smart, Senior Fellow at the Milken Institute, presented their global outlook, highlighting that the dynamics on the African continent can be one of the growth drivers of the global economy and Web3 adoption.
97% of the population of Africa is under the age of 65, and in contrast to the US, Europe and Asia, Africa is the only continent with a growing young population. Furthermore, more than half of the population is un- or underbanked. For example, in Ghana only one third of the population has a bank account, yet nearly 95% own a mobile phone. This underscores the need for mobile-first decentralized finance (DeFi) solutions in Africa. Solutions that can provide access to easy-to-use crypto wallets, improved stablecoin functionality, and secure and cheap transactions would benefit users all across the continent.
Another factor to address is the exorbitant costs of remittances in African countries. This is illustrated through World Bank data showing fees for traditional bank transfers from Germany to Ghana in October 2023 reaching approximately 17%. Recently, the weighted average prices of global remittances have begun to increase again. These fees, coupled with lengthy transfer times of up to 6 days, pose significant hurdles for individuals seeking to send or receive money. Today, ~10% of all financial transactions in Africa are digital. Cryptocurrency is used in approximately 6% of all peer-to-peer (P2P) transactions in sub-Saharan Africa, the highest share globally, and the volume of these transactions is increasing (data from Chainalysis and World Bank).
For mass adoption of digital currency to flourish, nine essential conditions must be met: (i) accessible mobile solutions with user-friendly wallets, (ii) scalable blockchain networks, (iii) reliable identity solutions, (iv) cost-effective gas fees, (v) stablecoin-based gas fees, (vi) affordable on- and off-ramps, (vii) support for local currencies, (viii) permissionless currencies, and (ix) transparent financial systems. Each of these factors plays a crucial role in creating an environment conducive to the widespread adoption of Web3 technologies.
MiniPay and Valora are two examples of accessible mobile wallets that are bridging the gap between traditional finance and decentralized ecosystems. Integrated within the Opera Mini browser, MiniPay already has over 1 million users in Nigeria, Kenya and Ghana, with more countries in Africa launching soon. MiniPay is focused on simple, fast and secure transactions for end-users, even for those without any blockchain knowledge. It is the fastest-growing wallet in the world. Valora allows users to send, save and spend money as easily as sending a text. Both of these mobile wallets use the Mento stable asset platform, and are built on the Celo network, which provides a highly scalable, fast and cheap EVM transaction layer. The integration of SocialConnect offers ease of use through a phone-based identity solution, enabling both MiniPay and Valora users to find other users via their phone number, or by simply connecting their phone book to the wallet. Transaction fees are far below 0.1%, and with Mento stablecoins, the transaction fees can even be paid in the same stable currency. Mento stablecoins are permissionless, decentralized and transparent, and the Mento Platform is fully open-source. With this open technology, the community can build more dApps on top of the Mento Platform to address new real-world use cases for digital assets.
In countries like Ghana, Nigeria, or Uganda, where currencies historically face devaluation and periods of high inflation, users have an advantage when a USD stablecoin like the cUSD (Celo Dollar) is available: it offers a stable digital currency for saving. However, when borrowing or engaging with local merchants, access to local (digital) currencies becomes crucial to avoid losses from exchange rate fluctuations. For example, borrowing in USD in a country with a devaluing local currency can result in higher repayment costs. Mento Labs’ team addresses this challenge by offering a platform for local currencies, allowing the community to launch local stable assets worldwide. The Mento Platform also provides tools supporting liquidity and usability for these stable currencies, offering a solution aligned with user preferences for stability and local accessibility.
Given the essential conditions for more widespread adoption of digital currency have been met, we are hopeful for 2024, that Web3 technology can enable users to embrace the potential of decentralized finance to reshape economies, empower communities, and make a positive impact through real-world use cases for digital assets.
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