While some sceptics may have misgivings about the technology, fuelled by isolated incidents involving alleged underhanded dealings, the fact is that cryptocurrency and blockchain has disrupted financial services and will be around for a lot longer.

This is the view of Heinrich Springhorn, Business Analyst at MobileData, a leading South African technology service provider focused on payment facilitation and prepaid electronic value distribution.

"There is some instability due to a hearing in Japan regarding a Bitcoin exchange that was shut down due to suspected embezzlement. However, this does not take away from the potential of what cryptocurrency, and essentially the blockchain, can mean to transacting worldwide," says Springhorn.

And this realisation can make a real difference for operations in Africa. MobileData's standpoint is that to apply this methodology in Africa and transact more freely, companies must be willing to participate in a decentralised model of transacting.

"One of the biggest set-backs at the moment is that there are only a small number of stock and service providers worldwide that accept cryptocurrency such as Bitcoin, and it is still far away from becoming main stream.

If a cryptocurrency should become mainstream, the potential exists that it could cause instability in financial enterprises. The reason for this is that the banking institutions will lose their locus of control over currencies and consumers will transact outside of their control," says Springhorn.

The decentralised nature of cryptocurrency means the reality facing markets is that there is no intermediary with the power to limit any fraud or embezzlement. "This means there is no way for the assets to be seized in these cases," Springhorn explains.

The company's assessment of the market is that for widespread adoption of this model to occur in Africa it will require a mechanism for on-the-fly exchanging of the cryptocurrency to a value of the fiat money. This is on the basis that services and stock providers do not accept cryptocurrencies as payment.

"If the service and stock providers do accept cryptocurrency as payment, then the transaction engine used will write an entry into the decentralized ledger and the transaction will go through the blockchain. Furthermore, there are socio-economic concerns with regards to cryptocurrency, as many end-users do not have access to the technology needed to transact with cryptocurrency,"Springhorn adds.

Breaking into the segment

Anyone with hardware and an internet connection can ‘mine cryptocurrency coins' and there may those who believe entering this arena to exploit the technology and differentiate their services will be straightforward – but not so says MobileData's analyst.

Another reality of this growing financial services trend is the lack of trust by end-users, particularly in developing communities, in banking institutions and their preference for fiat money alternatives represents a challenge for those operators hoping to break into the cryptocurrency/ blockchain market segment.

This scenario represents a real challenge to break out into this market segment, over and above the technological requirements which this segment simply do not have the infrastructure of and availability to use," says Springhorn.

MobileData's view is that branching an organisation out into cryptocurrency does seem to be the way of the future though, as there is a steady rise for a want of decentralised transactions which can be utilised, especially in Africa, to send value across borders without the need of banking institutions.

"This will not only empower end-users, but also businesses to start to truly become global. There will be no need for banking institutions to transfer value to their nostro accounts and then onward on behalf of businesses, where the businesses will be able to just send value through the block-chain," Springhorn continues.

"There are many advantages to cryptocurrencies, such as Bitcoin, however there is still a lot of socio-economic factors which need to be considered before this can be accepted as a mainstream alternative currency," he concludes.