Cryptocurrency exchanges in Africa and the difference between wallets and exchanges
By Ehis Omozusi on The Capital
With the growing popularity of digital assets on the African continent, many cryptocurrency exchanges have opened up within the last few years. The blockchain has diverse business opportunities, the most popular aspect being utilized the most would be exchanges. According to statista.com blockchain wallets have been on the rise reaching over 47 million Blockchain wallet users at the end of March 2020.
Cryptocurrency exchanges like Binance, Luno, Coinbase are internet-based platforms that provide a marketplace for orderly trades of digital currencies. It can be seen as an auction platform, where traders auction their digital assets for the best price. These exchanges charge a nominal fee for providing these services.
(Diagram showing how exchanges work)
Research shows that the majority of the individuals in Africa in cryptocurrency for remittance as well as investment purposes. Exchanging cryptocurrencies for the traditional currency (fiat) is the most common scenario in Africa at the moment. It is known that most parts of the continent have been let down by the unstable economy and inconsistent governance. Africa has shown promising potential for the blockchain space, which has attracted some foreign renowned exchanges in opening branches in Africa.
New exchanges, like IDAX, QuadrigaCX, USI Tech, quickly jumped on the bandwagon by entering into the market thinking it’s all rosy and have left the same way. The majority of them left with millions of people’s assets and this has led the public to choose their preferred exchanges carefully to avoid falling into the trap. However, the choice of using a particular exchange depends on several factors.
· Does the exchange trade in the coin that you are interested in buying?
Some exchanges offer a variety of coins and tokens, while others are particular about the reputation of the token they list. These exchanges have their reasons for the coins or tokens they offer. What is important for you as a user is if they offer what you want.
· What are their trading fees?
This is basically what the exchange is keeping for the service they are rendering. Some exchanges charge a flat rate depending on the asset you are trading, while some charge a percentage of your asset.
· What is the exchange account verification process?
How tasking it may be to get customer verification(KYC) done with the exchange, how long of your precious time it takes.
· Is the investment safe with them? Are they a reputable and secure platform to use?
Here you should find out how long they have been in the market for, their withdrawal time, and reputation with customers. Also how responsive they are.
A Few Recommended African Exchanges:
Quidax: Quidax was founded in 2018, a Nigerian based crypto exchange that prides herself in making sending digital currencies as easy as sending a text message. Quidax has five coins listed on their platform.
VALR: VALR is a South African based exchange that was founded in 2018, they trade Bitcoin, Ethereum and XRP to South African Rand. They offer a bunch of services
BitPesa: Founded in 2013, BitPesa provides wholesale cryptocurrency liquidity for individuals and institutions across Africa. In addition to fast settlement and number of currency options, BitPesa also boasts on the State-of-the-art security and variety of currency options they offer.
Payplux: Payplux is a platform for E currency, functioning since November 15th, 2012. It is a Ghanian crypto exchange, which provides its services across Africa. Payplux prides itself on principles of credibility and security. They have a variety of coins listed on their platform.
Kobocoin: It is a decentralized P2P digital currency and micropayment system. Kobocoin combines four unique human-friendly denominations. It utilizes a fraction amount of energy which requires keeping the bitcoin ecosystem running.
The exchanges listed are some we deem to be reliable and offer diversification in types of coins traded and financial services provided, such as lending, trading, cryptocurrency savings, some have cards and allow you withdraw fiat while they debit your crypto wallet and some allow you even plug in to their API as a merchant; this will enable you to receive crypto for goods you sell, however, most times one exchange is not sufficient to meet all the needs of an active trader.
There are several other crypto exchanges in Africa.
DIFFERENCE BETWEEN AN EXCHANGE AND A WALLET
There’s usually a misconception that exchanges are wallets and vice versa. To better understand this mechanism you only need to look at traditional money. When you’ve got cash in your physical wallet you control when, how much to spend, and if you want to spend at all. On the other hand, when you deposit the cash in a savings account you lose some of that control, the money is still yours nonetheless, but the bank may set certain limits on your spending habits.
An exchange is a platform where anyone can buy and sell bitcoins and other altcoins, and also send and receive any form of digital currency as it is applicable on the exchange. A wallet is a vault to store these assets until you want to make use of it. There are however Hot and Cold wallets. Any wallet you can download on your desktop or phone is referred to as a hot wallet while any wallet you hold physically like your purse is referred to as a Cold wallet.
It’s important to have an idea of what you plan to do with your cryptocurrency and how long you intend to keep it for. This can determine where the assets should be kept, it is always safer to keep your assets in a wallet than an exchange as the latter may be prone to hacks, regulations, or other external factors which may restrict the use of your funds.
For regular traders, keeping your cryptocurrency on an exchange is ideal as they are regularly buying and selling their assets as the prices fluctuate to make a profit and avoid running at a huge loss. If you’re new to cryptocurrency and still learning how to invest in Bitcoin and other cryptocurrencies, it might also be better you keep part of your funds on an exchange. On the other hand, if you are buying cryptocurrency for investment purposes and want to hold on for a long period, a wallet is your best choice as you’re solely responsible for the security of your funds. Just like a real wallet, if you lose it or forget all the access passes, no one can help you and your funds are lost.
With your wallet, private keys are the most important component of your cryptocurrency wallets. Ensuring that your private keys are secure and safe is paramount, unlike the exchange wallets the keys are kept within the platform, and if you forget your password there are ways to easily recover your account.
