Bitcoin block congestion problem has not affected the development of Bitcoin in Africa

Golden Finance News - As Bitcoin blocks have filled up, transaction fees and confirmation times on the Bitcoin network have increased dramatically over the past year.

Bitwala is a Bitcoin-based international money transfer startup Image source: Golden Finance

Some people believe that this problem is very detrimental to the development of Bitcoin in developing countries, but Bitwala CEO Jorg von Minckwitz told BitcoinMagazine that this is not the case.

Bitwala is a Bitcoin-based international money transfer startup that aims to bring blockchain banking services to everyone on the planet.

According to Minckwitz, changes to the Bitcoin network over the past year have not had much impact on popular Bitcoin use cases on the continent. While Bitwala believes that off-chain solutions like the Lightning Network are the future of the Bitcoin network, as a company it still likes Bitcoin as it is.

What is Bitcoin used for in Africa?

Minckwitz said South Africa is the most active region in terms of sign-ups and site visits, but other regions are also seeing increasing sign-ups and interest.

Bitcoin network congestion does not cause problems in Africa. Image source: Golden Finance

According to the startup, 30% of new users came from Africa and Southeast Asia.

“Bitcoin is becoming more popular in sub-Saharan and East Africa, where there are underserved areas of the world that sometimes require cryptocurrencies to compensate for the lack of local currencies,” Minckwitz said.

Mickwitz went on to say that Bitwala has seen a number of businesses, particularly in Nigeria, using bitcoin to provide banking services such as providing financial loans.

“Bitwala fills the gap between money transfer intermediaries and banks, making international transfers cheaper and faster, and while we can’t tell you how much money Bitwala users in Africa are transferring between friends and family, the volume of commercial transactions is growing,” Minckwitz said.

Kenyan fintech blogger Michael Kimani shared a similar view in an interview with CoinJournal, arguing that Bitcoin fills the gap between the country’s multiple online payment systems.

Bitcoin network congestion not causing problems in Africa

When asked if Bitcoin’s high transaction fees and long confirmation times had a negative impact on Bitwala,

Minckwitz said: "Honestly, no!"

"We like Bitcoin itself and don't think its high transaction fees are a threat. High transaction fees allow companies to optimize their payment processes, and many daytime transactions do not need to be settled on the chain. High transaction fees reduce spam transactions (useless transactions) on the chain, which we think is a good thing. Bitcoin is not a payment network, it is the value carried by the payment network," said Minckwitz.

Some in the Bitcoin community would certainly disagree with this statement; after all, the Bitcoin white paper discusses “an electronic payment system based on replacing trust with cryptographic proofs.”

That being said, as early Bitcoin users such as Hal Finney, the first person to receive Bitcoin from Satoshi Nakamoto, pointed out, Bitcoin has gold-like properties, which makes it an important store of value.

In Minckwitz's view, larger bitcoin companies should settle bitcoins the same way traditional banks do, at least for now. "They calculate their liabilities or balances and settle them once a day, rather than processing hundreds of transactions going back and forth throughout the day," he said.

“I think it depends on one’s perspective, but when you look at the current system in Africa, it’s much worse than the transaction fees in Bitcoin, which are a fraction of what the money transfer companies charge you to move money around,” Minckwitz continued.

Bitcoin as a means of storing value should not be forgotten in Africa. "The currencies of most African countries are unstable, and sometimes people lose everything overnight. We use Bitcoin as the first solution to control our own funds," he said.

Scaling Bitcoin off-chain

In Minckwitz's view, the best way to scale Bitcoin is to scale off-chain. In addition to improving the organization of user payment flows and using bank-like settlement technology, Minckwitz also hopes to further improve the transaction process through the activation of segregated witness and the application of the lightning network.

Speaking of Lightning Network, he said:

“Users can use off-chain transactions for a certain period of time, and at the end of the period, settle once on-chain to rebalance their account balances. This is an infinite scalability solution, similar to the systems that banks are using today, and I think it’s the right way to scale.”