Bitcoin and cryptocurrency scams have been the primary concern for most of the governments around the world. By following the old-school precautions, Nigerian traders control the bitcoin scams where traders create informal groups and conduct a complete background check.
Start of Nigeria bitcoin scams
Cryptocurrency first began in Nigeria with a scam. Mavrodi Mondial Moneybox or MMM was a Ponzi scheme that started from Russia while roping in millions of Nigerians from late 2015 to 2016 end. This scheme came with a promise of 30% return in as little time as 30 days. When the government started coming down on its bank accounts, MMM cut out the banks and asked the investors to use Bitcoins. At the end of 2016, MMM suspended its payout and robbed about 3 million people in Nigeria.
Despite the scams, people believed that bitcoin is the future.
According to Lucky Uwakwe, co-founder of the Blockchain Solutions Ltd. a cryptocurrency firm in Lagos:
“It was MMM that made Nigerians understand how Bitcoin worked.”
In comparison to the bitcoin trading of about $300,000 per week, a year above, today Nigerians are trading approximately $4.7 million a week in bitcoin.
As per David Ajala, who runs the digital currency exchange Naira in Nigeria:
“The growth has been crazy. It took us two years to get 10,000 customers. Within the last year, we’ve added 90,000.”
Factors behind the growth of Bitcoin in Nigeria
Often Nigerians have trouble using their credit cards at foreign online merchants. Due to a high fraud rate in Nigeria, most of the online stores don’t process a payment from a Nigerian card. Hence, bitcoin has become an attractive option here. There aren’t any costly chargebacks with bitcoin and on the basis of transaction origin, it can’t be blocked. The majority of Nigerians keep it as an alternative asset class by using it as a store of value.
In recent years, many emerging market currencies are struggling against the US dollars. In order to hedge against depreciation, investors are putting a small portion of their investment into digital currencies.
Nigeria beating the Bitcoin scams
Bitcoin scams are usually those schemes that ask for little to no subscription fees with the promise of sky-high returns. Like any other Ponzi scheme, the early investors get paid with the money of latest investors. Since they mostly rely on existing investors signing up new ones, when new investors stop coming which is inevitable, the scheme collapse.
In Nigeria, the scams follow a pattern where the target is being asked to wire over naira, the local currency, in exchange for bitcoins.
Bashir Aminu, a bitcoin enthusiast and a digital security expert in Lagos, says:
“Everybody I know has been scammed in one way or another.”
Unlike other bitcoin hubs, Nigeria has started developing informal traders’ groups and follow the old school approach to verify transactions. Aminu has started setting up an informal exchange on Telegram where if others want to join the group, they have to go through the review procedure. The security procedures may also involve face-to-face interaction for bitcoin exchange.
This informal trading of cryptocurrency has increased the size of Nigeria’s market. Aminu, the digital security expert in Lagos urge others to buy bitcoin and explains:
“If you don’t take a risk, you can’t get anything. And if it’s going to be the future of currency, then you better start now.”
Do you think this kind of old approach can work on the global level? Should other countries try this out too? Let us know your thought in comments below and follow or write us on twitter and facebook page.
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I am an associate content producer for the news section of Coingape. I have previously worked as a freelancer for numerous sites and have covered a dynamic range of topics from sports, finance to economics and politics.